Q1 2026 The Descartes Systems Group Inc Earnings Call

Operator: Good afternoon, ladies and gentlemen, and welcome to the Descartes Systems Group Quarterly Results Conference Call. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question-and-answer session. If at any time during this call you require immediate assistance, please press star zero for the operator.

Good afternoon, ladies and gentlemen, and welcome to the Descartes Systems Group quarterly results Conference call.

At this time, Oh, I'm, sorry in listen only mode.

Following the presentation, we will conduct a question and answer session.

If at any time during this call you acquire you need assistance. Please press star zero for operator.

Operator: This call is being recorded in the Wednesday, June 4th, plane 25.

Speaker Change: This call is being recorded and Novartis day June Forest planes 25, I would now like to turn the conference over to Mr is stopping and please go ahead.

Scott Pagan: I would now like to turn the conference over to Mr. Scott Pagan. Please go ahead. Thank you and good afternoon everyone. Joining me on the call today are Ed Ryan, CEO, and Allan Brett, CFO.

Speaker Change: Thank you and good afternoon, everyone. Joining me on the call today are Ed Ryan CEO, and Allan Brett CFO and I Trust that everyone has received a copy of our financial results press release that was issued earlier today.

Scott Pagan: I trust that everyone has received a copy of our financial results press release that was issued earlier today.

Scott Pagan: Portions of today's call, other than historical performance, include statements of forward-looking information within the meaning of applicable securities laws. These statements are made under the Safe Harbor provisions of those laws. These forward-looking statements include statements related to our assessment of the current and future impact of geopolitical, trade, tariff, and economic uncertainty on our business and financial condition.

Speaker Change: Purchases of today's call other than historical performance include statements of forward looking information within the meaning of applicable securities laws.

Speaker Change: These statements are made under the safe Harbor provisions of those laws.

Speaker Change: These forward looking statements include statements related to our assessment of the current and future impact of geopolitical trade tariffs and economic uncertainty on our business and financial condition.

Scott Pagan: Descartes Operating Performance, Financial Results and Condition, Cash Flow and Use of Cash. Business Outlook, Baseline Revenues, Baseline Operating Expenses, and Baseline Calibration. Anticipated and Potential Revenue Losses and Gains, Anticipated Recognition and Expensing of Specific Revenues and Expenses, Potential Acquisitions and Acquisition Strategy, Cost Reduction and Integration Initiatives, and other matters that may constitute forward-looking statements. These forward-looking statements involve known and unknown risks, uncertainties, assumptions, and other factors that may cause the actual results, performance, or achievements of Descartes to differ materially from the anticipated results, performance, or achievements implied by such forward-looking statements.

Speaker Change: Descartes operating performance financial results and condition.

Speaker Change: Cash flow and use of cash business outlook.

Speaker Change: <unk> revenues baseline operating expenses and baseline calibration.

Speaker Change: Painted and potential revenue losses, and gains anticipated recognition and expensing of specific revenues and expenses.

Speaker Change: Potential acquisitions and acquisition strategy cost reduction and integration initiatives and other matters that may constitute forward looking statements.

Speaker Change: Yeah.

Speaker Change: These forward looking statements involve known and unknown risks uncertainties assumptions and other factors that may cause the actual results performance or achievements of descartes to differ materially from the anticipated results performance or achievements implied by such forward looking statements.

Scott Pagan: These factors are outlined in the press release and in the section entitled certain factors that may affect future results in documents filed and furnished with the SEC, the OSC, and other securities commissions across Canada, including our management's discussion and analysis filed today. We provide forward-looking statements solely for the purpose of providing information about management's current expectations and plans relating to the future. Your caution that such information may not be appropriate for other purposes.

Speaker Change: These factors are outlined in the press release and in the section entitled certain factors that may affect future results in documents filed and furnished with the SEC.

Speaker Change: <unk> and other securities commissions across Canada, including our management's discussion and analysis filed today.

Speaker Change: Yeah.

Speaker Change: We provide forward looking statements solely for the purpose of providing information about management's current expectations and plans relating to the future.

Speaker Change: You are cautioned that such information may not be appropriate for other purposes.

Scott Pagan: We don't undertake or accept any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements to reflect any change in our expectations or any change in events, conditions, assumptions, or circumstances on which any such statement is based, except as required by law.

Speaker Change: We don't undertake or accept any obligation or undertaking to release publicly any updates or revisions to any forward looking statements to reflect any change in our expectations or any change in events conditions assumptions or circumstances on which any such statement is based except as required by law.

Ed Ryan: And with that, let me turn the call over to Ed. Hey, thanks, Scott, and welcome everyone to the call. Today, we're reporting strong first quarter revenues and annual adjusted EBITDA growth consistent with our plans in very challenging and uncertain market conditions for our customers.

Speaker Change: With that let me turn the call over that.

Speaker Change: Hey, Thanks, Scott and welcome everyone on the call today, we are reporting strong first quarter revenues and annual adjusted EBITDA growth consistent with our plans and very challenging and uncertain market conditions for our customers.

Ed Ryan: We're excited to go over these results with you and give you some of our perspective on the current business environment, but first, let me give you a word, Matt, for the call. I'll start by hitting some highlights of last quarter and some aspects of how our business performed.

Speaker Change: We're excited wherever these results with you and give you some of our perspective on the current business environment, but first let me give you a roadmap protocol.

Speaker Change: I'll start by hitting some highlights of last quarter and some aspects of how our business performed I'll then hand, it over to Alan who will go over the Q1 financial results in more detail.

Ed Ryan: I'll then hand it over to Allan, who will go over the Q1 financial results in more detail. After that, I'll come back and provide an update on how we see the current business environment and how our business was calibrated for Q2.

Speaker Change: After that I'll come back and provide an update on how we see the current business environment and how our business was calibrated for Q2, and we will then open it up to the operator to coordinate the Q&A portion of the call.

Ed Ryan: And we'll then open it up to the operator to coordinate the Q&A portion of the call. We'll start with the first quarter that ends April 30. Key metrics we monitor include revenues, profits, cash flow from operations, operating margins, and returns on our investments. For this past quarter, we again had very good performance in each of these areas. Total revenues were up 12% from a year ago, with services revenues up 14% from a year ago. Income from operations was up 9% from a year ago, with adjusted EBITDA up 12%. Our adjusted EBITDA margin was up one point from a year ago to 45%.

Alan: Well, let's start with the first quarter that ended April 30.

Alan: Key metrics. We monitor include revenues profits cash flow from operations operating margins and returns on our investments for this past quarter. We again had very good performance in each of these areas.

Alan: Total revenues were up 12% from a year ago with services revenues up 14% from a year ago.

Alan: Income from operations was up 9% from a year ago with adjusted EBITDA up 12%.

Alan: Our adjusted EBIT margin was up one point from a year ago to 45%.

Ed Ryan: We paid $115 million plus some restructuring costs to acquire 3G TMS, an acquisition I'll speak to later. We also generated almost $54 million in cash from operations in Q1, in a quarter where we also had payments to restructure 3G TMS immediately at close. At the end of the quarter, we had more than $175 million in cash, and we were debt-free with an undrawn $350 million line of credit. We remain well-capitalized, cash-generating, growing, and ready to continue to invest in our business.

Alan: We had $115 million plus some restructuring costs to acquire three G. Tms Nash and acquisition I'll speak to later.

Alan: We also generated almost $54 million in cash from operations in Q1 in a quarter, where we also have payments to restructure <unk> immediately at closing.

Alan: At the end of the quarter, we had more than $175 million of cash and we were debt free with an undrawn $350 million line of credit.

Alan: We remain well capitalized cash generating growing in order to continue to invest in our business.

Ed Ryan: We had a few things that were the primary drivers of growth in our business, and I'll talk about each of these now. First was in our transportation management area. First area of strength was in our transportation management pillar, in particular with our MacroPoint real-time visibility business. There's so many challenges with goods that are moving across borders. Solutions that help companies with more efficient domestic transportation moves have seen strong demand. We believe that we have the highest quality tracking service in the market, with a very high percentage of loads able to be tracked through our network due to our consistent focus on interacting with carriers and other transportation management systems to get status updates.

Alan: We had a few things that were the primary drivers of growth in our business and I'll talk about each of these now.

Alan: First was in our transportation management area.

Alan: First area of strength within our transportation management pillar in particular with our macro point real time visibility business.

Alan: So many challenges with goods that are moving across borders solutions that help companies with more efficient domestic transportation moves have seen strong demand. We believe that we have the highest quality tracking service in the market with a very high percentage of loads able to be tracked through our network.

Alan: Our consistent focus on interacting with carriers and other transportation management systems to get status updates.

Ed Ryan: We're even leveraging AI technologies to help our customers track an even greater percentage of their loads. As we entered the quarter, we were seeing some of our strongest months ever in the macro point business against the backdrop of declining domestic truck moves in the United States. The recent My Carrier Portal acquisition also has been a great addition to the transportation management solution stack. There's been a lot of media and market attention on cargo theft and fraud, with criminal networks exploiting systems by creating fake carriers and accepting delivery loads to steal cargo and or get payment.

Alan: We're even leveraging AI technologies to help our customers tracking even greater percentage of the world.

Alan: As we ended the quarter, we were seeing some of our strongest months ever macro point business against the backdrop of declining domestic truckloads in United States.

Alan: The recent my carrier portal acquisition also has been a great addition to the transportation management solution stack Theres been a lot of media market attention on cargo theft, and fraud criminal network with supporting systems by creating big carriers and accepting delivery loads to steel <unk> get payment.

Ed Ryan: My Carrier Portal helps identify this type of fraud by helping customers evaluate the legitimacy of carriers they're doing business with. We recently held a webinar with the California Highway Patrol to talk about the cargo fraud, and it was one of our highest attended events ever. MyCarrierPortal has been a great addition to the portfolio, allowing us to further distinguish ourselves in the transportation market. We also made another addition to our transportation management portfolio where we combined with 3G TMS in the latter part of this quarter. 3G has a traditional domestic transportation management system on a modern cloud architecture.

Alan: In my carrier portal helps identify this type of fraud by helping customers evaluate the legitimacy of carriers are doing business with <unk>.

Alan: We recently held a women are with the California Highway patrol will talk about the cargo fraud and it was one of our highest attended events ever.

Alan: Our carrier portal has been a great addition to the portfolio, allowing us to further distinguish ourselves in the transportation market.

Alan: We also made another addition to our transportation management portfolio portfolio, where we combined with <unk> Tms in the latter part of this quarter.

Alan: <unk> has a traditional domestic transportation management system on a modern cloud architecture. So many challenges in the international trade, making investment in domestic transportation was logical for us through G. Also a strength in parcel shipping which is an excellent complement to our existing shipping solutions overall the acquisition to provide some great functionality to our.

Ed Ryan: With so many challenges in the international trade, making an investment in domestic transportation was logical for us. 3G also has strength in partial shipping, which is an excellent complement to our existing shipping solution. Overall, the acquisition provides some great functionality to our existing customers and allows 3G customers with access to our real-time visibility and for our prevention solution. 3G did require some restructuring to put it on a path to the margins that Descartes prefers to operate at, which used some of our cash from operations in the quarter to get the business better positioned. In particular, with the acquisition happening near the end of the quarter, it meant that 3G didn't contribute much to our Q1 adjusted EBITDA and will require some operating history before it's fully integrated into our normal calibration.

Alan: Existing customers and allows <unk> customers with access to a real time visibility and fraud prevention solutions.

Alan: <unk> did require some restructuring to put them on a path to the margins that the cart prefers to operate at which used some of our cash from operations in the quarter to get the business better positioned in particular with the acquisition happened near the end of the quarter. It meant that <unk> didn't contribute much to our Q1 adjusted EBITDA and will require some operating history before it's fully.

Alan: <unk> integrated into our normal calibration.

Ed Ryan: Overall, transportation management grew well in a challenging environment. In the U.S. in particular, there's still a declining number of freight brokers and domestic truck moves. However, with our ability to become more efficient at tracking shipments and further distinguishing ourselves in the market, we've been able to grow with more tracked loads and more customers.

Alan: Overall transportation management grew well in a challenging environment in the U S. In particular, there is still a declining number of freight brokers and domestic truck moves however, with our ability to become more efficient at tracking shipments and further distinguishing ourselves in the market, we've been able to grow with more track loads and more customers.

Ed Ryan: Second area of strength was our global trade intelligence business. Tariff changes have been coming fast and furious, increases, decreases, pauses, commodity-specific tariffs. It's been a very busy time for our tariff group. Our customers are adjusting almost daily to a new tariff environment, and they need to know that they've got a timely and accurate information source to make their decisions with. In addition, our customers are researching how other companies are handling the changes, so our data mining research tools are in high demand so that no customer gets left behind. Our best marketing tool is every mention of tariffs in news headlines, so it's an area of strength in the quarter.

Alan: Second area of strength was our global trade intelligence business tariff changes have been coming fast and furious increases decreases pauses commodity specific tariffs. It's been a very busy time for our tire group our customers are adjusting almost daily to a new tariff environment, maybe even though they've got a timely and accurate information source to make their.

Alan: <unk> with <unk>.

Alan: In addition, our customers are researching how other companies are handling the changes so our data mining research tools are in high demand. So that no customer gets left behind our best marketing tool is every mention of tariffs and news headlines. So it's an area of strength in the quarter.

Ed Ryan: The third area was customs and regulatory compliance. These are primarily customs and security filings related to shipments crossing borders. A couple of things contributed to growth here. First, there were some newer import control system requirements in the EU that have driven demand for solutions to comply. Second, we saw some lumpy filing blips in the market as people rushed imports to get ahead of the pending tariffs or, alternatively, to take advantage of temporary tariff reprieves. This part of our business is strong as long as shipments are moving. However, one area the business has seen a bunch of change is the import of small packages into the United States, otherwise known as de minimis shipments.

Alan: The third area with customs and regulatory compliance. These are primarily customs and security filings related to shipments crossing borders a couple of things contributing to growth here first there were some newer import control system requirements in the EU that have driven demand for solutions to comply.

Alan: We saw some lumpy finally blips in the market as people rushed imports to get ahead of the pending tariffs or alternatively to take advantage of temporary tariff approved.

Alan: As part of our business is strong as long as shipments are moving.

Alan: However, one area of the business has seen a bunch of change is the important small packages in the United States.

Alan: <unk> known as de Minimis shipments.

Ed Ryan: The U.S. had a filing mechanism called Type 86 that allowed low-value shipments under $800 to come into the United States on a tariff-free basis. That exemption and filing mechanism was used most often by Chinese e-commerce retailers who were selling into the United States. The U.S. has stopped the evaluability of that exemption for China, meaning there are tariffs duties that now need to be paid on those shit notes. So in that business, we saw an influx of activity in Type 86 before the tariff exemption disappeared on May 2nd, after the quarter. Since then, there seemed to be a temporary pause from some larger foreign e-commerce vendors as they determined how to best import goods to the United States under the new procedures, and then a resumption of imports under a more traditional import measure, Type 11 or Type 1 violence, with tariffs being paid in this case.

Alan: <unk> had a filing mechanism called type 86 that allow low value shipments under $800 to come into the United States on the tariff free basis that exemption and filing Maxim mechanism was used most often by Chinese e-commerce retailers, who were selling into the United States U S has stopped the availability of that exemption for China.

Alan: There are tariffs duties that now need to be paid on those shipments. So in that business. We saw an influx of activity type 86 before the tariff exemption disappeared on may 2nd after the quarter. Since then we seem to be a temporary pause from some larger foreign e-commerce vendors as they determine how to best import goods to the United States under the new procedures.

Alan: And then a resumption of imports under a more traditional important measure.

Alan: 11 of our type one filings with tariffs being paid in this cadence.

Ed Ryan: We can handle those traditional import processes in high volumes, so we saw good demand from e-commerce vendors to move to our alternative filing solutions, including some large competitive wins from other vendors.

Alan: We can handle those traditional import processes and high volumes. So we saw good demand from e-commerce vendors to move or to our alternative financing solutions.

Alan: Including some large competitive wins from other vendors.

Alan: Okay.

Ed Ryan: So, those were the areas that had the largest impact on our growth in the quarter. However, the broader macro environment was very challenging for our customers. At its heart, the global trade environment has caused uncertainty for customers, often paralyzing their decision-making. We saw shipment volumes down in various modes of transportation, particularly in the U.S. to China trade and West Coast ports. We saw e-commerce vendors who import from China struggling with sourcing and or whether to pass tariff changes on to their own customers. We saw the broader market struggling with the potential broader inflationary impact of tariffs on the U.S.

Alan: So those are the areas that had the largest impact on our growth in the quarter. However, the broader macro environment was very challenging for our customers at its heart. The global trade environment has caused uncertainty for customers often paralyzing their decision, making we saw shipment volumes down in various modes of transportation, particularly in the U S. China trade and West Coast ports, we saw each.

Alan: Commerce vendors, who import from China struggling with sourcing <unk>, whether the past tariff changes onto their own customers.

Alan: Saw the broad broader market struggling with the potential broader inflationary impact of tariffs on the U S economy, we saw several domestic economies looking at recessionary economic statistics.

Ed Ryan: economy. We saw several domestic economies looking at recessionary economic statistics.

Ed Ryan: Without uncertainty in the global trade market and the economy in general, we took steps in May to reduce our costs by completing a restructuring that impacted about 7% of our workforce. We did this to put ourselves in the best position to grow during this challenging environment. Those who followed our business over past years will know that we take our commitment to continue adjusted EBITDA growth very seriously. These cost reductions were to prepare our business for any further challenges our customers may face in this uncertain market. We restructured our business from a position of strength, and our company is now in a position to grow consistent with our plans and to be flexible enough to address challenges with our customers that they may face from global trade and or economic conditions.

Alan: With that uncertainty in the global trade market and the economy in general we took steps and made to reduce our cost by completing our restructuring that impacted about 7% of our workforce. We did this to put ourselves in the best positioned to grow during this challenging environment, those who followed our business over past years, although that we take our commitment to continue.

Alan: Adjusted EBIT growth very seriously these cost reductions were to prepare our business for any further challenges our customers may face in this uncertain market.

Alan: We restructured our business from a position of strength and our company is now in a position to growth consistent with our plans and to be flexible enough to address challenges with our customers.

Alan: They face from global trade and economic conditions, we did it because of similar approach has helped us weather past challenging business environments. We did it because it's what our stakeholders would expect us to do we restructured our business to be even stronger in the future.

Ed Ryan: We did it because a similar approach has helped us weather past challenging business environments. We did it because it's what our stakeholders would expect us to do. We restructured our business to be even stronger in the future. We were doing what you'd expect Descartes to do.

Alan: We're doing what you'd expect the big part to do it one we posted strong double digit annual growth in revenues and adjusted EBITDA consistent with our 10% to 15% annual adjusted EBIT growth plan and consistent with the ramp up we previously communicated that we expected to see over the year.

Ed Ryan: In Q1, we posted strong double-digit annual growth in revenues and adjusted EBITDA consistent with our 10 to 15% annual adjusted EBITDA growth plan and consistent with the ramp-up we previously communicated that we expected to see over the year. We grew by acquisition by expanding our transportation management portfolio. We reduced our cost base to mitigate against potential future economic risks. We did exactly what you'd expect Descartes to do.

Alan: Grew by acquisition by expanding our transportation management portfolio, we reduced our cost base to mitigate against potential future economic risks. We did exactly what you would expect a car to do I am excited about where our businesses Q1 shows that we're on the right track for our plans for the year.

Ed Ryan: I'm excited about where our business is. Q1 shows that we're on the right track for our plans for the year. My thanks to all the Descartes team members for everything they've done to contribute to a great quarter and a great business.

Alan: Thanks to all of the Descartes team members for everything they've done to contribute to a great quarter and great business and with that I'll turn the call over to Alan to go through our Q1 financial results in more detail.

Allan Brett: And with that, I'll turn the call over to Allan to go through our Q1 financial results in Mordecai. Allan? Okay, thanks, Ed.

Alan: Okay. Thanks, Ed has indicated I'm going to walk you through our financial highlights of our first quarter, which ended on April 30.

Allan Brett: As indicated, I'm going to walk you through our financial highlights of our first quarter, which ended on April 30th. Revenues came in at $168.7 million in the quarter, an increase of approximately 11.5% from revenues of $151.3 million in Q1 of last year. Revenue from the acquisitions completed in the back half of last year, as well as the acquisition of 3G TMS completed earlier in the first quarter, contributed nicely to our revenue this quarter, while growth from new and existing customers also contributed, including revenues .

Alan: Revenues came in at $168 7 million in the quarter, an increase of approximately 11, 5% from revenues of $151 3 million in Q1 of last year.

Alan: Revenue from the acquisitions completed in the back half of last year as well as the acquisition of <unk> completed earlier in the first quarter contributed nicely to our revenue this quarter, while growth from new and existing customers also contributed including revenues.

Allan Brett: . revenue growth in our global trade intelligence solutions and our macropoint free visibility. Consistent with past quarters, our revenue mix in the quarter continued to be very strong with services revenue increasing 13.6% to $156.6 million and coming in at 93% of revenue in the first quarter. Licensed revenues were again minor at less than 1% of revenue in the quarter, while professional services and other revenue came in at $11.8 million or 7% of revenue, down 9% from $13.0 million in the same period last year, mainly due to a decline in safety training activity in our ground cloud business.

Alan: Growth in our global trade intelligence solutions, and our macro point freight visibility solution.

Alan: Consistent with past quarters, our revenue mix in the quarter continued to be very strong with services revenue, increasing 13, 6% to $156 6 million and coming in at 93% of revenue in the first quarter.

Alan: License revenues were again minor at less than 1% of revenue in the quarter, while professional services and other revenue came in at $11 8 million or 7% of revenue down.

Alan: Down 9% from 13.0 million in the same period last year.

Alan: Mainly due to a decline in safety training activity in our ground cloud business in Q1 last year, we had a sharp increase in the safety training revenue. This is because most of our ground cloud Fedex carriers need to recertify. Their training every 24 months. So this revenue stream tends to be quite lumpy with increases every other year and this.

Allan Brett: In Q1 last year, we had a sharp increase in the safety training revenue. This is because most of our ground cloud FedEx carriers need to recertify their training every 24 months. So this revenue stream tends to be quite bumpy with increases every other year, and this being an off year for our safety training service. Outside of GroundCloud, professional services revenues were generally flat with the first quarter of last year. In addition, there was also a slight decrease of just over half a million in revenue this quarter from foreign exchange changes. As despite its more recent weakness, the U.S.

Alan: An off year for our safety training services.

Alan: Okay.

Alan: Site of ground cloud professional services revenues were generally flat with the first quarter of last year.

Alan: In addition, there was also a slight decrease of just over half a million dollars in revenue this quarter from foreign exchange changes.

Alan: As despite its more recent weakness of the U S. Dollar was stronger against the Euro the Canadian dollar and the British pound in Q1 compared to the same quarter last year.

Allan Brett: dollar was stronger against the euro, the Canadian dollar, and the British pound in Q1 compared to the same quarter last year. We estimate that our growth in services revenue without the impact of recent acquisition or foreign exchange changes would have been approximately 4% in the first quarter. Gross margin for the first quarter came in at 76.4% of revenue this year, down very slightly from gross margin of 76.6% realized in the first quarter last year. With continued operating leverage, our operating expenses increased less than the increase of sales, growing by approximately 10.4% in Q1 over the same period last year, primarily related to the impact of acquisitions that were completed in the back half of last year.

Alan: We estimate that our growth in services revenue without the impact of recent acquisition of foreign exchange changes would have been approximately 4% in the first quarter.

Alan: Gross margin for the first quarter came in at 76, 4% of revenue this year down very slightly from gross margin of 76, 6% realized in the first quarter last year.

Alan: With continued operating leverage our operating expenses increased less than the increase of sales growing by approximately 10, 4% in Q1 over the same period last year.

Alan: Merely related to the impact of acquisitions that were completed in the back half of last year.

Allan Brett: As a result of the higher revenues and our continued offering leverage on expenses, we saw adjusted EBITDA grow by 12.1% to $75.1 million, or 44.5% of revenue in the quarter, which was up from $67.0 million, or 44.3% of revenue in the first quarter last year. From my GAAP earnings perspective, net income came in at $36.2 million, up 4% from net income of $34.7 million in the first quarter last year, and this is despite higher amortization costs and other financial charges related to our recent acquisition. Cash flow generated from operations came in at $53.6 million, or approximately 71% of adjusted EBITDA in the first quarter, down from operating cash flow of $63.7 million, or 95% of adjusted EBITDA in Q1 last year.

Alan: As a result of the higher revenues and our continued operating leverage on expenses. We saw adjusted EBITDA grew by 12, 1% to $75 1 million or <unk> 44, 5% of revenue in the quarter, which was up from 67.0 million or <unk> 44, 3% of revenue in the first quarter last year.

Alan: From a GAAP earnings perspective, net income came in at $36 2 million up 4% from net income of $34 7 million in the first quarter last year and this was despite higher amortization costs and other financial charges related to our recent acquisitions.

Alan: Cash flow generated from operations came in at $53 6 million or approximately 71% of adjusted EBITDA in the first quarter down from operating cash flow of $63 7 million or 95% of adjusted EBITDA in Q1 last year.

Allan Brett: Cash flow from operations was negatively impacted this quarter as we saw a slight increase in our days sales and receivable from an incredible 29 days of sales at the end of the fourth quarter back to 32 days sales and receivable at the end of Q1. Cash flow from operations was also impacted by some one-time acquisition-related charges related to the 3G acquisition, as well as the payment of prior year annual bonus.

Alan: Cash flow from operations was negatively impacted this quarter as we saw slight increase in our days sales in receivable from an incredible 29 days of sales at the end of the fourth quarter to 30 to 32 days sales in receivable at the end of Q1.

Alan: Cash flow from operations was also impacted by some onetime acquisition related charges related to the <unk> acquisition as well as the payment of prior year annual bonuses.

Allan Brett: As we had indicated on our conference call at the end of the fourth quarter, and as I mentioned earlier on the call, there is a lot of uncertainty out there in the global trade market, especially for our customers as they try to navigate these challenges. So we remain very pleased with these operating results against this uncertain free market environment. If we look at the balance sheet, our cash balances totaled $176 million at the end of April, down from cash balances of $236 million at the end of January, as we used approximately $112 million of our cash balances to complete the 3G acquisition, while we continue to generate additional positive cash flow from operations.

Alan: As we had indicated on our conference call at the end of the fourth quarter and as Ed mentioned earlier on the call. There is a lot of uncertainty out there in the global trade market, especially for our customers as they try to navigate these challenges.

Alan: So we remain very pleased with these operating results against this uncertain market environment.

Alan: If we look at the balance sheet, our cash balances totaled $176 million at the end of April down from cash balances of 236 million at the end of January as we used approximately $112 million of our cash balances to complete piece.

Alan: <unk> acquisition, while we continue to generate additional positive cash flow from operations.

Allan Brett: As a result, we still have the $176 million of cash, as well as $350 million available for us to draw under our credit facility for future acquisitions. We continue to be very well capitalized to allow us to consider all acquisition opportunities in our market, consistent with our business goals.

Alan: As a result, we still have the 176 million of cash as well as $350 million available for us to draw under our credit facility for future acquisitions.

Alan: We continue to be very well capitalized to allow us to consider all acquisition opportunities in our market consistent with our business plan.

Allan Brett: As we look towards the balance of our fiscal 2026, we should note the following. After spending approximately $1.9 million in capital additions in the first quarter, we expect to incur approximately $4 to $5 million in additional capital expenditures for the balance of this year, as our business will continue to be non-capital intensive. After incurring amortization costs of $19.1 million in Q1, we expect amortization expense will be approximately $60 million for the balance of the year, with this figure being subject to adjustment for foreign exchange changes and future acquisitions. Our tax rate in Q1 came in at 24.4% of pre-tax income, slightly lower than our expected range of 25 to 30%.

Alan: As we look towards the balance of our fiscal 2026, we should note the following.

Alan: After spending approximately $1 9 million in capital additions in the first quarter, we expect to incur approximately $4 million to $5 million in additional capital expenditures for the balance of this year as our business will continue to be non capital intensive.

Alan: After incurring amortization costs of $19 1 million in Q1, we expect amortization expense will be approximately $60 million for the balance of the year with this figure being subject to adjustment for foreign exchange changes and future acquisitions.

Alan: Our tax rate in Q1 came in at 24, 4% of pretax income slightly lower than our expected range of 25% to 30% and this was mainly a result of a few smaller tax benefits and recoveries realized in the first quarter.

Allan Brett: And this was mainly a result of a few smaller tax benefits and recoveries realized in the first quarter. Looking at the balance of the year, we currently expect our tax rate will trend much closer to our expected range in the next few quarters, meaning that our tax rate for the year is likely to end up in the range of between 24 and 28 percent of pre-tax income. So somewhere either side of our blended statutory tax rate of 26.5 percent. However, as always, we should add that our tax rate may fluctuate from quarter to quarter from one-time tax items that may arise as we operate internationally across multiple countries.

Alan: Looking at the balance of the year. We currently expect our tax rate will trend much closer to our expected range for the next few quarters, meaning that our tax rate for the year is likely to end up in a range of between 24 and 28% of pretax income so somewhere either side of our staff our blended statutory tax rate of 26, 5%.

Alan: However, as always we should add that our tax rate may fluctuate from quarter to quarter from onetime tax items that may arise as we operate internationally across multiple countries.

Allan Brett: After incurring stock-based compensation expense of $4.4 million in the past quarter, we currently expect stock compensation to be approximately $20 million for the remainder of fiscal 26, subject to any forfeitures of stock options or share units. As we have mentioned in the past few quarters, we have estimated that the payments of contingent consideration for our earner arrangements for the balance of this year will be approximately $2.3 million, subject to any necessary adjustments resulting from the final earner calculation. Going forward, subject to unusual events and quarterly fluctuations, we expect to continue to see solid cash flow conversion and expect our cash flow from operations to be between 80% and 90% of our adjusted EBITDA in the quarters ahead.

Alan: After incurring stock based compensation expense of $4 4 million in the past quarter. We are currently we currently expect stock compensation to be approximately $20 million for the remainder of fiscal 2006 subject to any forfeitures of stock options or share units.

Alan: As we have previously have we've mentioned in the past few quarters, we estimate that the payments of contingent consideration for earn out arrangements for the balance of this year will be approximately $2 $3 million subject to any necessary adjustments, resulting from the final earn out calculation.

Alan: Going forward subject to unusual events or and quarterly fluctuations, we expect to continue to see solid cash flow conversion and expect our cash flow from operations between to be between 80, and 90% of our adjusted EBITDA in the quarters ahead.

Allan Brett: And finally, as Ed indicated earlier in the call, given the economic and global trade uncertainty that many of our customers are facing, we have taken the steps to reduce our cost structure by reducing our global workforce by approximately 7% and eliminating various other operating costs. As a result, we will be recording a restructuring charge of approximately $4 million in Q2 this year and would highlight that once completed, we would anticipate annual cost savings of approximately $15 million from our Q1 operating expense runoff. Quite simply, we remain committed to managing our business to grow our adjusted EBITDA by 10 to 15 percent.

Alan: And finally as Ed indicated earlier in the call given the economic and global trade uncertainty that many of our customers are facing we are we have taken the steps to reduce our cost structure by reducing our global workforce by approximately 7% and eliminating various other operating expenses.

Alan: As a result, we will be recording a restructuring charge of approximately $4 million in Q2 this year.

Alan: I would highlight that once completed we would anticipate annual cost savings of approximately $15 million from our Q1 operating expense run rate.

Alan: Quite simply we remain committed to managing our business to grow our adjusted EBITDA by 10% to 15% that remains our objective for the current fiscal year. Despite the unique and tougher trade global trade environment, we operate in.

Allan Brett: That remains our objective for the current fiscal year, despite the unique and tougher global trade environment we operate in.

Allan Brett: So with that, I'll turn it back to Ed to provide our baseline calibration for Q2. Okay, great. Thanks, Allan. As I said earlier and last quarter, these are challenging business conditions for our customers. Just some of the most recent changes include tariffs between the U.S. and China at record high levels, even with a temporary agreement to reduce those tariffs during the negotiation period. Allegations of violations of that temporary U.S.-China agreement, putting the temporary reduced tariff structure at risk. Increased U.S. tariffs on imports of steel. Imposition and suspension of tariffs on the EU. Challenges and appeals relating to the legality of U.S.

Alan: So with that I'll turn it back to Ed to provide our baseline calibration for Q2, okay. Great. Thanks, Alan as I said earlier and last quarter. These are challenging business conditions for our customers. Just some of the most recent changes include tariffs between the U S and China at record high levels, even with a temporary agreement to reduce those tariffs.

Alan: The negotiation period.

Alan: Allegations of violations of that temporary U S, China agreement, including the temporary reduced tariff structure at risk.

Alan: U S tariffs on imports of steel and position and suspension of tariffs on the EU challenges and appeals relating to the legality of U S tariffs warning warnings to countries that temporarily the temporary tariff relief measures will expire if new trade agreements with the U S aren't reached by early July.

Ed Ryan: tariffs. Warnings to countries that temporary tariff relief measures will expire if new trade agreements with the U.S. aren't reached by early July. Heightened tensions in the war in Ukraine and corresponding sanctions. A new Postmaster General at the U.S. Postal Service with potential changes in policies and service.

Alan: Tensions in the war in Ukraine, and corresponding sanctions new postmaster general.

Alan: U S postal service with potential changes in policies and services, so thats a lot.

Ed Ryan: So that's a lot. Our customers can deal with change. Businesses and supply chains are adaptable. However, what's more challenging than change is uncertainty. It's very difficult for our customers to make decisions, especially long-term ones, when there's no certainty on how or when the landscape will change. But just the belief that it will. When our customers have difficulty predicting how their businesses will perform or be impacted, it becomes more challenging for us. I think we're starting to see some of that uncertainty impacting volumes in what feels like a pretty volatile shipping market. Domestic U.S. truck volumes remain depressed.

Alan: Our customers can deal with change businesses supply chain Saar adaptable, however was more challenging than changes uncertainty, it's very difficult for our customers to make decisions, especially long term loans when there's no certainty on how or when the landscape will change, but just the belief that it will.

Alan: When our customers have difficulty predicting how their businesses will perform or be impacted it becomes more challenging for us I think we're starting to see some of that uncertainty impacting volumes in what feels like a pretty volatile shipping market domestic U S truck volumes remain depressed air shipments had been trending with modest growth, but look to be under pressure Ocean track.

Ed Ryan: Air shipments have been trending with modest growth but look to be under pressure. Ocean traffic has seen massive shifts in trade lanes and port activity with the pullback from China negatively impacting some ports and other ports benefiting from alternate sources. Each month we prepare a global shipping report that monitors ocean imports into the U.S. with data obtained from U.S. Customs and Border Protection. Our report from May will be coming out in the next few days and highlights that in the month of May, U.S. container imports declined following several months of growth, falling 10% from April and 7% year-over-year.

Alan: Eric has seen massive shifts in trade lanes and productivity with the pullback from China are negatively impacting some ports another court benefiting from alternative sources.

Alan: Each month, we prepare global shipping monitors ocean imports into the U S with data obtained from U S customs and border protection. A report for me will be coming out in the next few days and highlights then in the month of May use container imports declined following several months of growth falling 10% from April and 7% year over year.

Ed Ryan: As part of that, imports from China dropped sharply, down 21% from April and down 7% compared to May 2024. For Descartes, we've grown during challenging business conditions in the past. Our plan is to continue to do so again now. Some of those things that we believe put us in a good position to do that include we're diversified in domestic logistics and international logistics. Many of the changes right now impact international supply chains. However, we have great strength in domestic transportation moves and are routing and scheduling businesses, transportation management and e-commerce and last mile business. We're particularly strong in the global trade intelligence business.

Alan: As part of that import from China dropped sharply down 21% from April and down 7% compared to May 2024.

Alan: For Descartes, we've grown during challenging business conditions in the past our plan is to continue to do so again now some of those things that we believe put us in a good position to do that include we're.

Alan: We're diversified in domestic logistics and international logistics many of the changes right now impact international supply chain. However, we have great strength in domestic transportation moves in our routing and scheduling businesses transportation management and e-commerce and last mile businesses.

Alan: We're particularly strong in the global trade intelligence business. We believe we can provide a ton of help to our customers in an environment, where people are looking for information or help managing tariffs and duties.

Ed Ryan: We believe we can provide a ton of help to our customers in an environment where people are looking for information or help managing tariffs and duties. continually updating sanctioned party lists, thirsting for competitive intelligence, and dealing with increased export license complexity. We're diversified globally. We've got domestic transportation solutions that can be used around the world. And where there's shifting international trade relations, we have an established global logistics network that can be leveraged by our customers. We've proactively taken steps to reduce our cost base to address potential revenue uncertainty. We have a total growth model. We have an extensive track record of acquisition activity to complement organic growth.

Alan: Updating sanctioned party list thirsting for competitive intelligence and dealing with increased export license complexity.

Alan: We're diversified globally, we've got domestic transportation solutions that can be used around the world and where they're shifting international trade relations. We have an established global logistics network that can be leveraged by our customers.

Alan: Proactively taken steps to reduce our cost base to address potential revenue uncertainty.

Alan: We have a total growth model, we have an extensive track record of acquisition activity to complement organic growth changing market conditions, often provide us with even more opportunities to add solutions for our customers and grow by acquisition.

Ed Ryan: Changing market conditions often provide us with even more opportunities to add solutions for our customers and grow by acquisition. We're well-capitalized. We have more than $175 million in cash and a $350 million underwrong line of credit, and we are a cash-generating business. Ultimately, regardless of how well Descartes positioned, our success is determined by our ability to help our customers. Our customers remain uncertain about how these market conditions will impact their businesses. We're mindful of this and the impact of the changing global trade and foreign exchange environments in setting our calibration and considering what our final quarterly financial results may be.

Alan: We're well capitalized we have more than $175 million in cash and a $350 million Undrawn line of credit and we are a cash generating business.

Alan: Ultimately, regardless of how well Descartes has positioned our success is determined by our ability to help our customers our customers remain uncertain about how these market conditions will impact their businesses. We're mindful of this and the impact of the changing global trade and foreign exchange environments, and setting our calibration and considering what our final <unk>.

Alan: <unk> financial results may be.

Ed Ryan: In our quarterly report, we've provided a comprehensive description of baseline revenues, baseline calibration, and their limitations. As of May 26, the day we commence our cost reduction activities, using foreign exchange rates of 73 cents to the Canadian dollar, $1.14 to the euro, and $1.36 to the pound, we've estimated that our baseline revenues for the second quarter of fiscal 2026 were approximately $150.5 million, and our baseline operating expenses were approximately $92.5 million. We consider this to be our baseline adjusted equity calibration of approximately $58 million for the second quarter of fiscal 2026, for approximately 39% of our baseline revenues as of May 26, 2025.

Alan: In our quarterly report, we provided a comprehensive description of baseline revenues baseline calibration and their limitations as of May 26, with de recommence, our cost reduction activities using foreign exchange rates of 70 <unk> the Canadian dollar.

Alan: $1 14 to the Euro and $1 36 to the Pan we've estimated that our baseline revenues for the second quarter of fiscal 2026, or approximately $155 million and our baseline operating expenses were approximately $92 5 million. We consider this to be our baseline adjusted EBIT calibration of approximately 50.

Alan: The $8 million for the second quarter of fiscal 2026, or approximately 39% of our baseline revenues as at May 26 2025.

Ed Ryan: We continue to expect that we'll operate in an adjusted EBITDA operating range of 40 to 45 percent. Our margin can vary in that range given such things as revenue mix, foreign exchange movements, and the impact of acquisitions as we integrate them into our business. These are uncertain times for our customers. It's a challenge for them to know what they can rely on in this global trade environment.

Alan: We continue to expect that we will operate in an adjusted EBITDA operating range of 40% to 45% our margin can vary in that range, given such things as revenue mix foreign exchange movements and the impact of acquisitions as we integrate them into our business.

Alan: These are uncertain times for our customers, it's a challenge for them to know what they can rely on in this.

Alan: Global trade environment. Our goal is to continue to show our customers and other stakeholders that one thing that gorilla is descartes.

Ed Ryan: Our goal is to continue to show our customers and other stakeholders that one thing they can rely on is Descartes.

Ed Ryan: Thank you, everyone, for joining us on the call today. As always, we're available to talk to you about our business in whatever manner is most convenient for you.

Alan: Thank you to everyone for joining us on the call today as always we're available to talk to you about our business in whatever manner is most convenient for you and with that operator, I will turn it over to you for Q&A portion of the call.

Operator: And with that, operator, I'll turn it over to you for the Q&A portion of the call. Thank you very much.

Alan: Okay.

Speaker Change: Thank you very much ladies and gentlemen, we will now begin the question and answer session should you have a question. Please press star followed by the number one on your Touchtone phone.

Operator: Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star followed by the number one on your touchtone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press star followed by the number 2. If you are using a speakerphone, please make sure to lift your handset before pressing any key.

Alan: You will hear a prompt that Johan has been raised.

Alan: Should you wish to decline from the polling process. Please press star followed by the number two issue.

Alan: We are using a speaker phone please make sure to lift your handset before pressing any keys.

Dylan Becker: Your first question comes from the line of Dylan Becker from William Blair. Please go ahead. Hey, guys, it's Jackson Bogli on for Dylan Becker. So I was just curious about the workforce reduction.

Speaker Change: Your first question comes from the line of <unk> Becker from William Blair. Please go ahead.

Speaker Change: Hey, guys.

Speaker Change: Jackson Bouley on for doing factor. So I was just curious about the workforce reduction and if there was any additional color that you'd give on maybe what areas.

Jackson Bogli: And if there's any additional color that you would give on maybe what areas that was cut out of and how you're thinking about going forward those levers that you'll see in the business. Thanks. Thanks, Jackson. Yeah, it was generally across the board, and across the board not only for functional areas, but geographically. It was about a little under 200 people in our business, unfortunately, and we did it to make ourselves a healthier business going forward and put ourselves in a position where we can continue to make the kind of margins that the street has come to expect from us in running our business on a daily basis.

Speaker Change: That was cut out of and how youre thinking about going forward those are <unk>.

Speaker Change: Levers that you will see in the business. Thanks.

Speaker Change: Thanks Jackson.

Speaker Change: Yes, it was generally across the board and across the board not only for functional areas, but geographically.

Speaker Change: Little under 200 people in our business.

Speaker Change: Fortunately and we did it.

Speaker Change: We ourselves are healthier business.

Speaker Change: Going forward and put ourselves in a position where we can continue to make the kind of margins that.

Speaker Change: That the street has come to expect from us.

Speaker Change: In.

Speaker Change: Running our business on a daily basis.

Ed Ryan: Things like AI have helped us maybe make some of these cuts a little easier, but at the end of the day, we thought it was the right thing to do and to prepare for the uncertainty that I just talked about. Great, thank you. Thank you, Jeff.

Speaker Change: Things like AI and helped us.

Alan: Maybe make.

Alan: Some of these cuts a little easier, but at the end of the day, we thought it was the right thing to do and to prepare for the uncertainty that I just talked about.

Alan: Great. Thank you.

Jeff: Thank you Jeff.

Paul Treiber: Your next question comes from the line of Paul Treiber from RBC Capital Markets. Please go ahead. Thanks very much. Just a question on organic services growth. You mentioned it was 4% this quarter. I think last quarter was 6%. You did a good job calling out some of the stronger growing areas of the business.

Speaker Change: Your next question comes from the line of Paul Treiber from RBC capital markets. Please go ahead.

Paul Treiber: Oh, thanks very much.

Paul Treiber: Hi, just a question on organic services growth you mentioned was 4% this quarter I think last quarter was 6% you did a good job calling out some of the stronger growing areas of the business, but what did you see that were headwinds what segments were softer.

Ed Ryan: But what did you see that were headwinds or what segments were softer that were a drag on organic services growth this quarter? As you might expect, it was a lot of the uncertainty that was going on led to big movements in transaction volumes. We did all right in some of the areas. I mentioned some of the customs filing, security filing areas that we did okay in, but certainly Ocean was down. Truck continues in a bit of a depressed state. We did all right on Macro Point, but maybe some of the areas within truck messaging, not as well.

Alan: That were.

Alan: Were a drag on organic services growth this quarter.

Alan: And as you might expect it was.

Alan: A lot of the uncertainty that has gone on led to.

Alan: Big movements in.

Alan: And transaction volumes.

Alan: Some of the areas I mentioned some of the customers bond security found areas that we can serve.

Speaker Change: Certainly ocean was down truck.

Speaker Change: <unk> continues in a bit of a depressed state.

Alan: We did alright on macro point, but maybe some of the other areas within truck messaging.

Alan: Not as well.

Ed Ryan: And, you know, I think that's a result of the tariffs, that people aren't sure what to do and they freeze. And, you know, 31% of our business or so is that transaction revenue. And, you know, of course, we have underlying minimums that are a backstop against that. But, you know, the customers weren't getting down to their minimums. They were just doing a little less than they used to.

Alan: And I think Thats the result of the tariffs that.

Alan: If people aren't sure what they do and they freeze and.

Alan: 31% of our business or so is that transaction revenue.

Alan: Underlying minimums that.

Alan: That is our backstop against that but.

Alan: The customers weren't getting down to their minimums that are just doing a little less than they used to.

Ed Ryan: Overall, we're pretty happy with how we performed, even after you heard our last call. You know, there was probably even more uncertainty coming into that call. A lot of stuff's changed since then. And, you know, we thought the company performed pretty well during that time, made up for some areas that were getting hit with some areas that were doing pretty well, like the macro point and the content businesses that I talked about at the beginning of the call.

Alan: Overall, we're pretty happy with how we performed with you're going to have you heard our last call.

Alan: Yes.

Alan: There's probably even more uncertainty coming into that call us what's changed since then.

Alan: And.

Alan: We thought the company performed pretty well during that time, we made up for some <unk>.

Alan: Some areas that we are getting hit with some some areas that we're doing pretty well like the macro point.

Alan: And.

Alan: The content business as I talked about at the beginning of the call.

Ed Ryan: That's helpful to understand. Have you seen a change in either renewal rates or, I guess, conversion of sales pipeline as a result as well? Not much, actually, although we might anticipate that could happen if this keeps up. You know, we've continued to have good sales momentum with the subscription deals that we have always done pretty well at. That continued to keep up. You know, I think we haven't seen, you know, customer defections or people spending significantly less money with us or trying to change the terms of their contract, but we've got to see what happens in the economy.

Alan: That's helpful to understand.

Alan: Have you seen a change in either renewal rates or.

Speaker Change: I guess conversion.

Alan: Sales pipeline as a result as well.

Alan: Not much actually although we might anticipate that that could happen. If this keeps up.

Alan: We've continued to have good sales momentum.

Alan: With the.

Alan: With the trade.

Alan: Subscription deals that week.

Alan: We have always done pretty well.

Alan: <unk> continued to keep up.

Alan: I think we haven't seen cuts.

Alan: Customer defections are people spending significantly less money with us or trying to change the terms of their contract.

Alan: But we got to see what happens in the economy those things happen when the economy turns down.

Ed Ryan: Those things happen when the economy turns down. You know, I haven't seen yet where the economy is going, and probably a lot of it has to do with how quickly does this end? You know, does the U.S. negotiate an end to a lot of these tariff situations with the countries where they just delayed them 90 days? Do they delay another 90 days or something like that? You know, what happens with the China negotiation? Things like that are the balls that are up in the air that have us say, you know, we're not sure what's going to happen next.

Alan: Haven't seen yet where the economy's going ahead.

Alan: A lot of it has to do with how quickly does this end.

Alan: Does the U S negotiated and do a lot of these tariff situations with the with the countries, where they just delayed 90 days to date delay another 90 days or something like that.

Alan: What happens with the China negotiation things like that are the balls that are up in the air that having us say, we're not sure what's going to act in next.

Ed Ryan: In the meantime, you know, you know us as conservative operators. that are, you know, we got to weather the storm and, you know, cut our costs and try to run our business as efficiently as we can onto the circuit.

Alan: In the meantime.

Alan: This conservative operators.

Alan: We got to weather the storm and.

Alan: Cut our cost and try to run our business as efficiently as we can under the circumstances.

Paul Treiber: And then just lastly, just on 3G TMS, the, you know, contributed I think it's 2.4 million in the quarter, is that a normal runway rate to assume going forward? And then can you just confirm that it's not reflected in the baseline? No, from a baseline perspective, Paul, we've, I mean, typical with us with acquisitions, I mean, we're getting to know that business, we're getting to know the renewal rates and renewal times, etc. So, we've incorporated conservatively, you know, incorporate that into the baseline right now. So, it is reflected in baseline. Again, pretty typical as we get to know businesses more, we've owned that business for two months now.

Alan: And then just lastly, just on <unk>.

Alan: It contributed $2 4 million in the quarter is that a normal runway rate to assume going forward and then can you just confirm that it's not reflected in the baseline.

Alan: No from a baseline perspective Paul.

Alan: Typical with us with acquisitions I think we're getting to know that business forget they can know the renewal rates and renewal times et cetera. So we've we've incorporated.

Alan: Conservatively.

Alan: Corporate that into the baseline right now.

Alan: So it is reflected in baseline again pretty typical as we get to new businesses more we've had we've owned that business for for two months now so.

Paul Treiber: So, we'll perfect that. I think we said that in the prepared remarks that it is, you know, for the most part reflected in baseline calibration.

Alan: Perfect that I think we said that in the prepared remarks.

Alan: It is.

Alan: For the most part reflected in baseline calibration.

Alan: Okay.

Paul Treiber: Okay, thanks for taking the questions. Great, thanks.

Alan: Okay. Thanks for taking my questions.

Alan: Alright, thanks, guys.

Raimo Lenschow: Your next question comes from the line of Raimo Lenschow from Barclays. Please go ahead. Perfect. Thank you. Ed, you've seen downturns before. How do you compare what you're seeing at the moment with other ones? in like 2000, 2002, 2023. you know, earlier, like, you know. I mean, at the moment, it doesn't feel as bad. But what's interesting is, I think there's a lot more uncertainty right now. People don't know what's going to happen, I think. In the pandemic, they may not have known what's going to happen right away, but they were preparing for the worst in the pandemic, for everything to shut down.

Speaker Change: Your next question comes from the line of Raimo <unk> from Barclays. Please go ahead.

Speaker Change: Perfect. Thank you.

Speaker Change: Yeah.

Alan: You've seen downturns before.

Alan: How do you compare what you're seeing at the moment.

Alan: <unk>.

Alan: 2022 into 2023.

Alan: Ernie.

Alan: Okay.

Alan: I mean at the moment it doesn't feel as bad but what's the experience I think there's a lot more uncertainty right now people don't know what's going to happen I think in <unk>.

Alan: And the pandemic may not have known what's going to happen right away, but they were preparing for the worst and the pandemic for everything we shutdown and it turns out.

Ed Ryan: And it turns out it got better pretty quickly. You know, in 2008, I think people really prepared for the worst, and there really was a bad situation for about a year, until government stepped in and started pumping more money into the economy. And, you know, we were not only in a recession, but a depression. Right now, I think it's hard to identify what we're in, right? Are we in a recession right now? Are we close to one? Does all this go away if the tariffs get renegotiated? Or if, you know, the final analysis that, you know, you're not allowed to change all these tariffs, you know, except to see there's a lot of balls in the air, and our customers, I think, don't know what to do.

Alan: Pretty quickly.

Alan: I think people really prepared for the worst and that really was a bad situation for about a year.

Alan: Until government stepped in and start pumping more money in the economy.

Alan: We were not only in a recession, but a depression right now I think it's hard to identify what were in right are we in a recession right now are we close to one.

Alan: Does all of this go away if the tariffs.

Alan: Get renegotiated or.

Alan: The final analysis that youre not allowed to change all these tariffs I now accept a seasonal odd balls in the air and our customers I think don't know what to do and.

Ed Ryan: And, you know, they're still shipping stuff. But certainly, not everything ships to and from the United States. There's lots of other stuff shipping around the world, other locations that we benefit from as well. But the U.S. is obviously a big portion of the world's, you know, container volume and shipment volume. And, you know, we're kind of behaving as you might expect us to do. We're going to be conservative and manage our business to keep making money. You know, we mentioned on the call, like, we're a total growth model. You know, we see this as if things get worse, we see this as an opportunity to keep making money and use that money to buy up competitors that might not be in as good a position as us.

Alan: Theres still ship and stuff, but.

Alan: Certainly not everything ships to and from United States as lots of other stuff shipping around the world other locations that we benefit from as well, but U S is obviously, a big portion of that.

Alan: The worlds.

Alan: Container volume and shipment volume.

Alan: And we're kind of behavior.

Alan: As you might expect it to us to do we're trying to be conservative in and manage our business to keep making money now.

Speaker Change: You mentioned on the call it total growth model.

Alan: We see this.

Alan: If things get worse, we see this as an opportunity to keep making money and use that money to buy up competitors that might not be as good a position as us.

Ed Ryan: So, you know, we're just watching what's going on like everybody else and trying to run our company the best through it. It doesn't seem like dire circumstances, not yet at least. If I had to guess, I'd say it probably won't get as bad as some of the other downturns we've had. But, you know, I don't know either for sure.

Alan: We're just.

Alan: Watching what's going on like everybody else and trying to run our company the best through it doesn't seem like dire circumstances.

Alan: Yet at least.

Alan: Provided guess I'd say, probably won't get as bad as some of the other downturns, we've had but I don't know either for sure.

Ed Ryan: And then, this time, you actually reacted relatively quickly with the changes on the cost base, and it's always sad to see colleagues go. Like, talk a little bit about what drove that to do it now, rather than wait. Thank you. Thanks, Raimo. Yeah, that's just our, you know, the way we operate, right? We used to always do that in the beginning of the pandemic, right? We think it was in May of the pandemic, we had a 5% reduction in force because our revenue went down 5%. This is a reaction similar to that, right? You know, we see a lot of uncertainty in the market and say, hey, we need to react to that.

Alan: And then.

Alan: Just kind of your equity.

Alan: Briefly with the.

Alan: With the changes on the cost base and that's what we see coming.

Alan: Talk a little bit about what drove that to do it now rather than wait. Thank you.

Alan: Okay. Thanks very much.

Alan: Yes.

Alan: Just.

Alan: With the way, we operate right, where you saw us do that in the beginning of the pandemic.

Alan: It was.

Alan: It may have a great day.

Alan: 5% reduction in force because our revenue went down 5%.

Alan: This is a reaction similar to that rate.

Alan: See a lot of uncertainty in the market.

Alan: And say, hey, we need to react to that and if we can't control. The revenue right now we can at least controllable costs.

Ed Ryan: And if we can't control the revenue right now, we can at least control the cost. And it's important to us to keep making money and to keep trying to make 10% to 15% growth and even to every year. That's really the main promise that we make to our shareholders. And we want to be able to live up to that promise and put ourselves in a position to live to fight another day and get through this a little better than other companies do so that, you know, when they get themselves in trouble, we have the money to buy up some of the better assets.

Alan: And it's important to us to keep making money and to keep trying to make 10% to 15% growth in EBIT every year.

Alan: Really the main promise that we make to our shareholders.

Alan: We won't be able to live up to that promise and put ourselves in a position to live to fight another day and get through this.

Alan: A little better than other companies do so that.

Alan: When they get themselves in trouble, we have the money to buy up some of the better assets just like we did.

Ed Ryan: Just like we did, you know, in the in the 08 crisis and maybe to a lesser extent in the COVID crisis. Good luck. Hey, thank you.

Alan: And the.

Alan: And the prices and maybe to a lesser extent in the.

Alan: Covid crisis.

Alan: Okay makes sense good luck.

Alan: Alright, thank you.

Alan: Okay.

Stephanie Price: Your next question comes from the line of Stephanie Price from CIDC. Please ask a question. Hi, thank you.

Speaker Change: Your next question comes from the line of Stephanie price from CIBC. Please ask a question.

Stephanie Price: Hi, Thank you.

Ed Ryan: Ed, I was hoping you could talk a little bit about the appointment of the new Chief Commercial Officer. I'm just curious if you're expected to make additional changes within the sales organization. No, I mean, we've built work here five, six years now. We're very comfortable with him. He was being groomed for this move anyway. And timing, you know, may have been a bit of a surprise to us. But, you know, I think there's a lot of faith in our company that he's the right guy for the job. And happy for him that he's getting to step up.

Speaker Change: Ed I was hoping you could talk a little bit deployment of the new Chief commercial officer, and just curious if you expect to make additional changes in the sales organization.

Speaker Change: No I mean, we.

Speaker Change: Both work here five six years now we're very comfortable with him.

Speaker Change: He is being groomed for this move anyway.

Speaker Change: Timing.

Speaker Change: And a bit of a surprise to us, but I think there's a lot of faith in our company that he's the right guy for the job.

Speaker Change: And happy for him that he's getting a step up.

Ed Ryan: And, you know, for the most part, he was running a large part of the sales force leading into this anyway. And now he's taking over the whole sales force. So I think, you know, for the most part, you're not going to see a whole lot of change in our sales effect. Great.

Speaker Change: Both parties were not a large part of the salesforce leading into this.

Speaker Change: And now he's taken over the wholesales for so.

Speaker Change: I think.

Speaker Change: For the most part youre not going to see a whole lot of change in our sales effectiveness.

Stephanie Price: And then just on the consolidation that we're seeing within the space, obviously WiseTech announced the acquisition of E2 Open. Just curious what your thoughts are around the competitive environment here and how you see it evolving? Yeah, I mean, it's probably a sign of the times, right? You know, I've been saying for a while, prices are coming down, people are... more willing to come into a price range that we think is an appropriate amount to pay for a company. The WiseTech E2 Open deal is probably a sign of that. We looked at that deal a long time ago and decided it probably wasn't a great fit for us.

Speaker Change: Great and then just on the consolidation that we're seeing within the space, Obviously wise check announced the acquisition of EQ open.

Speaker Change: Curious what your thoughts are around the competitive environment here and how you see evolving over time.

Speaker Change: Okay.

Speaker Change: No I mean, it's probably a sign of the times right, we have been saying for a while prices are coming down people.

Speaker Change: More willing to.

Speaker Change: Coming to a price range that we think is an appropriate amount to pay for a company of the wife Jackie to open deals probably a sign of that we looked at that deal long time ago, and decided probably wasn't a great fit for us.

Ed Ryan: I wish WiseTech the best in that. We're not really competitive with either of those two companies in the market, per se. But we do think we're in a very good position just with a lot of cash that we're sitting on and a lot of debt capacity that we have to make additional acquisitions in the future as prices come more into line. We're in a healthier position than most to take advantage of that. We see stuff that's closer fit to what we like. We'd like to be able to jump on it and make sure that we make it part of our global logistics network.

Speaker Change: <unk> now really competitive with either of those two companies in the market per se.

Speaker Change: But we do think we're in a very good position.

Speaker Change: Just with a lot of cash that we're sitting on a lot of debt capacity that we have to make.

Speaker Change: Make additional acquisitions in the future as prices come more into line and.

Speaker Change: We're in a healthier position than most to take advantage of that and.

Speaker Change: When we see stuff that's closer to what we like we like to be able to jump on it and make sure that we make it part of our global logistics network.

Speaker Change: Thank you.

Stephanie Price: Thank you, Stephanie.

Speaker Change: Thank you Stephanie.

John Shao: Your next question comes from the line of John Shao from the National Bank. Please go ahead. Yes, thanks for taking my question. I understand there's a bit of noise around international freight volume at this point because that one could be potentially volatile. But how should we think about the domestic freight volume, especially the correlation between domestic and international? Any trends or any considerations you may share with us given that South by you're doubling down investment domestic? Yeah, I mean, you know, we were exposed to both and, you know, the tariff changes in our international space are between the US and the rest of the world, but not, you know, other parts of the world, other parts of the world.

Speaker Change: Your next question comes from the line of John Shaw from the National Bank. Please go ahead.

John Shaw: Yes, thanks for taking my questions.

Speaker Change: I understand there's a bit of noise around international freight volume at this point.

Speaker Change: One could be potentially volatile, but how should we think about the <unk>.

Speaker Change: Domestic freight volume, especially the correlation between domestic and international any trends or any considerations you may share with us given that it sounds like youre doubling down investment domestic.

Speaker Change: Yes, I mean, we were exposed to both in the tariff changes that are international spacer.

Speaker Change: Between the U S and the rest of the world, but not other parts of the world other parts of the world. So there's still two thirds of our international business sits in normal shape.

Ed Ryan: So, you know, there's still two-thirds of our international business that's in normal shape at the moment. You know, we've been in a fortunate position to do very well in domestic, despite, you know, maybe that market being a weaker market for the last year and a half to two years, and hope to continue that. And also, you know, as we expand overseas and domestic markets overseas, that we have a real opportunity to take the dominance that we've enjoyed here in North America over the last couple of years, you know, kind of growing in the face of of decreasing transaction volumes in domestic transportation, we continue to grow that business because we've been able to pick up business from our competitors, because we think we have a stronger offering.

Speaker Change: <unk>.

Speaker Change: We've been an unfortunate position it to do very well on domestic.

Speaker Change: Right.

Speaker Change: Maybe that market being a weaker market for the last year and a half to two years and hope to continue that and also as we expand over season domestic markets overseas.

Speaker Change: Real opportunity too.

Speaker Change: Take the dominance that we've enjoyed here in North America.

Speaker Change: Over the last couple of years kind of kind of growing in the face of.

Speaker Change: Increasing transaction volumes in domestic transportation, you've continued to grow that.

Speaker Change: That business, because we've been able to pick up business from our competitors because we think we have a stronger offering.

Ed Ryan: And we're looking forward to bringing some of that overseas in the coming years. You got it. Thanks for the colors. And in terms of the organic growth, considering some of the tariff policies after Q1, so how should we think about organic growth profile for Q2 and maybe going forward? Do you think it's going to be similar to the current level?

Speaker Change: And we're looking forward to bringing some of that overseas in the coming years.

Speaker Change: Okay got it thanks for the color and in terms of the organic growth considering some of the tariffs pauses. After Q1, so how should we think about organic growth profile for Q2, and maybe going forward do you think it's going to be similar to the current level.

Ed Ryan: The short answer is I don't know, you know, we'll have to see what happens and I'm probably saying I don't know more than I normally have to say, you know, right now in the last couple months. We'll just have to see. I mean, we plan on running our business to perform well either way. We're very focused on making money. And we plan to make the kind of money that we've always promised people that we would make, despite whatever happens to the revenue. If you remember back 10, 12 years ago, we were growing 10 to 15 percent every year, you know, with one, two, and three percent organic growth.

Speaker Change: Yes, the short answer is I don't know.

Speaker Change: Well see what happens and I'm.

Speaker Change: Brought me, saying I don't know.

Speaker Change: More than I normally have to say it right now in the last couple of months in.

Speaker Change: We will just have to see I mean, we plan on running our business to perform well either way, we're very focused on making money and we plan to make the kind of money that we have always promised people that we would make.

Speaker Change: Despite whatever happens to the revenue.

Speaker Change: If you remember back 10, 12 years ago, we were growing 10% to 15% every year.

Speaker Change: With one 2% and 3% organic growth so.

Ed Ryan: So even at four, which is, you know, not as well as we were doing a year and a half ago, and I think everyone might be able to see why, you know, we're hoping that that turns up. We're hoping that these tariff situations get settled and people can eliminate some of the uncertainty in their business and start to move forward and make decisions, and that will help our revenue growth there. In the meantime, we're planning to run our business so that we can still keep making money at the clip that we've always promised people that we would.

Speaker Change: Even if four which is not as well as we were doing a year and a half ago and I think everyone might be able to see why.

Speaker Change: We're hoping that that turns up for open that these tariff situations get settled and people can.

Speaker Change: Some of the uncertainty in their business and start to move forward to make decisions and that will help our revenue growth. There in the meantime, we're planning to run our business. So that we can still keep making money at the at the clip that we've always promise people that we bought it.

Ed Ryan: Thanks. Maybe one last question.

Speaker Change: Okay, maybe one last question for me.

Ed Ryan: Just try to reconcile your cost reduction with your goal to grow EBITDA by 10% to 15% on an annual basis. So my question is, is expected cost savings already included in that target or just purely incremental to the target? It was an effort to make sure that we are in a position to hit this target. It may become incremental if growth rates go up, you know, if some of these tariff issues get settled and people get back to shipping stuff like they normally did, you know, we may end up doing better because of it, but we made these decisions to make sure we're in a safe position to continue to do 10 to 15% growth and even to like we've always said we would.

Speaker Change: One last question just trying to reconcile your cost reduction with your goal to grow EBITDA by 10% to 15%.

Speaker Change: Annual basis. So my question is that is it. So is the expected cost savings are already included in that or did or just purely incremental to the target.

Speaker Change: No. It's it was an effort to make sure that we are in a position to hit those targets.

Speaker Change: Okay.

Speaker Change: Incremental.

Speaker Change: Yes, maybe come incremental if.

Speaker Change: Growth rates go up some of these to average just gets settled and people get back to ship and stuff like that normally did.

Speaker Change: We may end up doing better because of it but we made these decisions to.

Speaker Change: To make sure we're in a safe position to continue to.

Speaker Change: Two two.

Speaker Change: To do 10% to 15% growth in EBIT like we've always said we would.

Ed Ryan: Thanks again. Thank you.

Speaker Change: Okay. Thanks again.

Speaker Change: Thank you.

Cole Couzens: Next question comes from the line of Scott Group from Wolf Research. Please go ahead. Hey guys, this is Cole Cousens. Quick question on De Minimis. Is there any way that you guys can frame up how much of your transactional business is air freight and do you have a... How much of that is tied to De Minimis? And I know you hit on it a little in the prepared comments, but can you expand more on...

Speaker Change: Next question comes from the line of Scott Group from Wolfe Research. Please go ahead.

Speaker Change: Hey, guys. This is cole cousins on for Scott Group.

Speaker Change: Just a quick question on de Minimis is there any way that you guys can frame up how much of your transactional business as airfreight and do you have a sense for how much of that is tied to de minimis.

Speaker Change: I know you hit on it a little in the prepared comments, but can you expand more on the activity Youre seeing now that de Minimis is going away.

Ed Ryan: I don't think we've separately broken that out. What I can tell you is we've done quite well under the circumstances. If you think about what's happened here, everyone was basically told that there's no more de minimis filing with China, where most of it was coming from. You can imagine that if there's no more Type 86 filings, and it's a relatively small part of a quarter's revenue, but it's not nothing either. We were doing very well in it, and it all went away one day, May 2nd, and I think what we're doing about it, and we've benefited quite a bit from it, we also are the global leader in Type 1 filings, Type 2 filings, and Type 11 filings, which is what everyone switched to.

Speaker Change: Out of the group.

Speaker Change: Separately broken that out what I can tell you is we've done quite well under the circumstances.

Speaker Change: If you think about what's happened here everyone was basically told US there is no more de Minimis finally, with China, where most of it was coming from.

Speaker Change: You can imagine.

Speaker Change: If theres no more type 86 filings in.

Speaker Change: Relatively small part of our quarter's revenue, but it's not nothing either.

Speaker Change: We were doing very well in it.

Speaker Change: <unk>.

Speaker Change: They all want a way one day.

Speaker Change: Second in.

Speaker Change: What we're doing about it and we've benefited quite a bit from it.

Speaker Change: We also are the.

Speaker Change: Global leader in type one filings type two filings in say 11 filings, which is what everyone's switch two.

Ed Ryan: I think a lot of these companies, they paused for a week or two and just said, I don't know what I'm going to do here. It's just like the Xians and the Timus and a lot of other people liked them, and then they started shipping again. I think we were ready for that. Some of our competitors were not. We were able to pick up business from them as a result of that, because they could not handle the volume in these new types of transactions that we had had a lot of experience with already, but were kind of new to some of our competitors, and we picked up.

Speaker Change: And I think a lot of these companies they paused for a week or two and just said I don't know what I'm going to do here is just like the <unk> and the team moves in a lot of other people like them and then they started shipping again.

Speaker Change: And I think we.

Speaker Change: We're ready for that.

Speaker Change: Some of our competitors were not we were able to pick up business from them as a result of that because it cannot handle the volume in these new types of transactions that we had a lot of experience with already but we're kind of new to some.

Speaker Change: Some of our competitors and we picked up.

Ed Ryan: a bunch of businesses as a result of that. So oddly enough, it's working out pretty well for us. um...

Speaker Change: Sponsor business as a result of that so.

Speaker Change: And now it's working out pretty well for us.

Speaker Change: Okay great.

Ed Ryan: maybe just more broadly with the rest of the transactional aaron ocean Can you describe what you saw following the 90-day pause? Is there any indication from shippers at this point as to what's to be expected? You know, that's tended, that seems to have subsided now as well. And I told you the stats for May, they were lower across the board in ocean. Air has held up pretty well. Domestics, you know, continues, I think, to be in a great recession. But we've kind of done pretty well on that. And we've, you know, picked up a lot of business from our competitors during that time.

Speaker Change: Maybe just more broadly with the rest of the transactional air and Ocean business.

Speaker Change: Kind of can you describe what you saw following the 90 day pause and maybe is there any indication from shippers at this point as to what's to be expected.

Speaker Change: After the pause or is it.

Speaker Change: I too uncertain at this point.

Speaker Change: Anyone I'll speculate about it what's going to happen here to deposit no. One no one seems to know for sure pulling us.

Speaker Change: Prior to all this.

Speaker Change: As you might have expected there were some pull through where people trying to get stuff in before tariffs hit.

Speaker Change: And then we saw a shift from the West coast ports to the East Coast ports, where west coast volume was down significantly, but east coast to coast volume was up.

Speaker Change: And.

Speaker Change: Tenant that seems to have subsided now as well.

Speaker Change: And I told you the stats for me or they were lower across the board in Ocean.

Erez: Erez held up pretty well domestics.

Erez: Domestics continues I think to be in a freight recession.

Erez: We've kind of done pretty well on that and then <unk>.

Speaker Change: Picked up a lot of business from our competitors during that time and we think.

Ed Ryan: And, you know, we think we offer a great service in that area with MacroPoint. And we by far have the most connections out there. And we've been able to get people to switch to us in the process from some of our competitors. So that's been pretty good news for us.

Speaker Change: We offer great service in that area with macro point and we by far have the most connections out there and we've been able to to get people to switch to us in the process from some of our competitors. So that's been.

Speaker Change: Pretty good news for us.

Ed Ryan: Thanks guys, I'll turn it back.

Speaker Change: Okay. Thanks, guys I'll turn it back.

Paul Treiber: Thanks, Paul.

Lachlan Brown: Next question comes from the line of Lachlan Brown from Redburn Atlantic, please go ahead. Hi, Ed, Allan. Thanks for the question. JTR Solutions has been a great driver for this business at the moment. Are you able to provide any data on the growth that you're seeing? Sorry, I'm not clear. Um, are you able to provide any detail that you're seeing within the tariff and duties database, and then just also any commentary on the performance of the other side of the global trade intelligence solutions like sanctioned parties and bills of lading? The Sanctioned Parties is largely business as usual.

Speaker Change: Next question comes from the line of Lackland Brown from Redburn Atlantic. Please go ahead.

Lackland Brown: Hi, Alan Thanks for the question.

Lackland Brown: J P oscillations payment growth drops to the business at the moment.

Lackland Brown: It would provide any breakout in the graph.

Lackland Brown: Alright.

Lackland Brown: Are you able to provide any detail.

Lackland Brown: Staying within the tariff and duty database.

Speaker Change: And then just any commentary on that performance at the other side of the global trade intelligence installation like sanction parties and deals of lighting.

Speaker Change: That's actually parties is largely business as usual, we've been doing very well.

Ed Ryan: We've been doing very well there. But really, the strength in that business has been on the tariffs and duties portions where the rates are changing all the time. We're seeing very good growth rates there year over year. I think we're somewhere almost approaching 20% right now. And, you know, I expect that's going to continue as long as tariffs are in the news every day. People are going to be looking for access to that database. A little bit to our surprise and pleasant surprise is the data mining business that's also in that content area has done very well as people have started to look in that database a lot more aggressively to try and figure out what to do next.

Speaker Change: There.

Speaker Change: But really the strength in that business has been on the tariffs and duties portions where the rates are changing all the time, we're seeing very good growth rates there year over year I think we're up.

Speaker Change: Somewhere almost approaching 20% right now.

Speaker Change: And.

Speaker Change: I expect that's going to continue as long as tariffs are in the news every day people are going to be looking for more access to that database.

Speaker Change: A little bit to our surprise pleasant surprises the data mine business. That's also in that content area has done very well as people have started to look in that database.

Speaker Change: Lot more aggressively to try and figure out what to do next and that's been a pleasant surprise for us so.

Ed Ryan: And that's been a pleasant surprise for us. So, you know, when these transaction volumes have gone down and you say, geez, it's all bad news for Descartes, I'd go, well, some of the areas are actually doing all right. Based on what's going on, because we've got a broad solution set that helps people in a lot of areas, even when some of the shipment volumes down. So, that's why I see us put up, you know, what I'd say is decent results in the face of a very uncertain environment where people are frozen and not shipping as much as they did just a few months ago.

Speaker Change: When these transaction volumes have gone down and you'd say Gee that spans all bad news for Descartes I go well some of the areas are actually doing all right.

Speaker Change: Based on what's going on is we've got a broad solution set that that helps people a lot of areas, even when some of the shipment volumes now so.

Speaker Change: So I see us put up what I would say is decent results in the face of <unk>.

Speaker Change: A very uncertain environment, where people are frozen and not shipping as much as they did just a few months ago.

Speaker Change: Right.

Ed Ryan: That's very clear, thanks.

Speaker Change: That's very clear thanks, and on the <unk> acquisition I. Appreciate it's early days, but could you talk to the integration process and how you're thinking about the cross sell upsell opportunity and also if you could provide any detail on the pricing structure. If it's volume buys still recurring subscription and if there are plans to unit.

Ed Ryan: And on the 3G TMS acquisition, I appreciate it's early days, but could you talk to the integration process and how you're thinking about the cross-sell, up-sell opportunity? And also, if you could provide any detail on the pricing structure, if it's volume-based or recurring subscription, and if there are plans to unify it with the pricing model for the other TMS systems. It's largely a subscription business and, you know, it's early days on the integration there. We thought that, you know, we, and I mentioned this in the prepared comments, we needed to get their cost structures in line with ours.

Speaker Change: With Dr processing model Fiat in the Tms system.

Speaker Change: It's largely.

Speaker Change: Correction business.

Speaker Change: <unk>.

Speaker Change: It's early days on the integration there we thought.

Speaker Change: And I mentioned this in the prepared comments, we needed to get their cost structures in line with ours. So we had a bit of a.

Ed Ryan: So we had a bit of a restructuring right away. Day one, we bought the company. You've seen us do this a few times now. MacroPoint, we did this. Visual Compliance, we did this. Just in an effort to get them to run the way that we run. And, you know, we had to take a cash charge for that, which is, you know, just a towning issue. But, you know, in the long run, I think that's going to allow us to operate that business more profitably and get it integrated into Descartes more quickly. If you've heard us talk about how we do integrations, we go fast.

Speaker Change: <unk>.

Speaker Change: Right away day, one when we bought the company is seamless.

Speaker Change: <unk> seen us do this a few times now macro point, we did this visual compliance business.

Speaker Change: In an effort to get them to run the way that we run.

Speaker Change: And we have taken a cash charge for that which is just a timing issue but.

Speaker Change: In the long run I think that's going to allow us to operate that business more profitably and get it integrated into Descartes and more quickly.

Speaker Change: You've heard us talk about how we do integrations, we go fast.

Ed Ryan: You know, we move everyone into their component parts of our business, and that's already happened. And try and make them part of the same team. And I know already that they're selling, you know, 3G with MacroPoint and my carrier portal all bundled together a number of times already. So that's, you know, a little bit of a sign to me that the acquisition is going to work well. So we're excited about that. Thanks Ed, I appreciate the question.

Speaker Change: We move everyone into their component parts of our business and Thats already happened.

Speaker Change: And try and make them part of the same team and I know already that they are selling.

Speaker Change: <unk> three <unk>.

Speaker Change: Macro point in my carrier portal all bundled together.

Speaker Change: A number of times already so thats.

Speaker Change: A little bit of a sign to me that the acquisition is going to work well. So we're excited about that.

Speaker Change: Thanks, Ed I appreciate the question.

Ed Ryan: Hey, thank you all.

Michael: Okay. Thank you Michael.

Richard Chu: Your next question is from the line of Richard Chu from Scotiabank. Please go ahead. Hi, this is Richard, in for Kevin today. I was wondering if you could talk a bit more about the acquisition pipeline. If you look across roughly your half dozen or so areas of logistic slash supply chain industry that you cover, are there any areas that are standing out as a particular area of focus or interest? Can you talk about, you know, valuations and competition with peers or private equity, which might also be looking to make some acquisitions? The acquisition market for us is looking very good at the moment.

Speaker Change: Your next question is from the line of Richard <unk> from Scotiabank. Please go ahead.

Speaker Change: Hi, This is Richard in for Kevin today.

Speaker Change: I was wondering if you could talk a bit more about the acquisition pipeline. If you look across roughly your half dozen or so areas of logistics supply chain industry that you cover are there any areas that are standing out as a particular area of focus or interest can.

Speaker Change: Can you talk about valuations and competition with peers.

Speaker Change: Private equity, which may also be looking to make some acquisitions.

Speaker Change: The acquisition market for US is looking very good at the moment, you've seen us do a lot in the last year and a half I think you probably likely to see that continue priced.

Ed Ryan: You've seen us do a lot in the last year and a half. I think you're probably likely to see that continue. Prices are coming down. Contrary to what you said a second ago, we are not seeing private equity firms show up nearly as much as they used to. We're seeing them back out of deals all over the place or be selling companies instead of buying companies. A good friend of mine in private equity once told me, we're either buying or we're selling. We're not doing both. I think in large part, they're selling right now. They have investors that are saying, where's my money?

Speaker Change: Prices are coming down contrary to what you said a second ago, we are not seeing private equity firm show up nearly as much as they used to and we're seeing them back out of deals all over the place or.

Speaker Change: Be selling companies instead of buying companies.

Speaker Change: A good friend of mine and private equity once told me, we're either buying or we're selling we're not doing both and I think in large part they are selling right now and trying to they are investors that are saying where is my money I'd like to get some money back out of this thing and they're feeling that pressure.

Ed Ryan: I'd like to get some money back out of this thing. They're feeling that pressure. When they do show up in deals, they're not showing up nearly as aggressively as they have in the past, and that's created an opportunity for us. High interest rates harm them a lot more than they harm us. We're making money and using our cash flow to buy companies. They were levering up to buy companies and doing so four, five, six, seven times, which in our world would be very dangerous. We probably wouldn't go past three. Three would be too low for them.

Speaker Change: When they do show up in deals they are not showing up nearly as aggressively.

Speaker Change: As as they have in the past and thats, creating an opportunity for us.

Speaker Change: High interest rates harm them, a lot more than they harm us, where we're making money and using our cash flow to buy companies. They were levering up to buy companies and doing so 4567 times, which our role will be very dangerous, we probably wouldn't go past three and.

Speaker Change: Normally three was too low for them. They would think that was not using their cash flow.

Ed Ryan: They would think that was not using their cash well enough. All of a sudden, when interest rates are up in the high single digits, that changes the game. It doesn't change it for us, really, because we're making profits. We're putting that cash in the bank and using it to fund future acquisitions. We're playing a different game than they are. We want to be around when prices keep coming down. If the economy does take a turn for the worse here, we want to be able to keep making the same kind of margins we were making and growing the same amount every year, even with lower revenue growth.

Speaker Change: While the sudden when interest rates are up in the high single digits. It changes the game and it doesn't change it for us really because we're making profits for putting that cash in the bank and using it to fund future acquisitions, and so we're kind of playing a different game than they are.

Speaker Change: And we want to be around one <unk>.

Speaker Change: Prices keep coming down as the economy does.

Speaker Change: Take a turn for the worse here, we want to be able to keep making the same kind of.

Speaker Change: Margins, we are making in growing the same amount every year, even with lower.

Speaker Change: Revenue growth and.

Speaker Change: That's.

Ed Ryan: Why you see us take a lot of the actions that we've described here on the call. I could argue this is when we're at our best historically, as you know, times get tough and the decisions get very difficult, and we've been through a lot of that before. Long-tenured management team that's been working together for a long time, and we've done well in a lot of difficult situations together, you know, if I could describe it, you know, When trouble like this starts, a lot of teams start fighting with each other about having to cut costs and where are you cutting costs and I'm not and blah, blah, blah, all these things, that's not what's going on here.

Speaker Change: Why you see us take a lot of the actions that we've described here on the call.

Speaker Change: I could argue this is one where our best historically is.

Speaker Change: At times get tough and the decision to get very difficult and we've been through a lot of that before.

Speaker Change: Long tenured management team that's been working together for a long time.

Speaker Change: And we've done well in a lot of difficult situations together.

Speaker Change: If I could describe it.

Speaker Change: Sure.

Speaker Change: When when trouble like this starts a lot of team start fighting with each other.

Speaker Change: Having to cut costs and why are you cutting costs and I'm not in below all of these things.

Speaker Change: What's going on here you have a lunch or people that have been through this before and theyre almost going hey, no. One likes doing this but we are good at it and we're going to do a good job here so that we come out.

Ed Ryan: You have a bunch of people that have been through this before and they're almost going, hey, no one likes doing this, but we are good at it and we're going to do a good job here so that we come out in a better position than we went into it and come out in a better position than our competitors, which puts us in a very good position to grow handsomely as things start to improve. You saw that happen in 08, you saw that happen in 2020 and we're certainly gearing up to make sure that happens here.

Speaker Change: In a better position than when we went into it and come out in a better position than our competitors, which puts us in a very good position to take.

Speaker Change: Grow handsomely as things start to improve you saw that happen in <unk> you saw that happen in 2020.

Speaker Change: We're certainly gearing up to make sure that happens here.

Ed Ryan: Got it, thank you.

Speaker Change: Got it thank you.

Ed Ryan: Also, I was wondering, is there any way to give us a view of the breakdown if your customers are revenue-based by S&B versus enterprise? And are you seeing any changes, positive, negative, in this current macro on the S&B portion of the business? Okay, great. Thanks for taking in my questions. Thanks. The next question comes from the line of Robert Young from Catherine. Please go ahead. Hi, good evening. The comment you made about MacroPoint, the real time visibility, driving some share gains, just given, you know, your coverage and the demand you're seeing there. I think last quarter, you suggested that that was particularly a function of the shipper market and you're moving into their big retailers and manufacturers.

Speaker Change: Also I was wondering is there any way to give us a view of <unk>.

Speaker Change: Breakdown of your customers, our revenue base by SMB versus enterprise.

Speaker Change: And are you seeing any changes positive or negative in this current macro on the SMB portion of the business.

Speaker Change: Yes.

Speaker Change: I don't know if I can I don't know if I could I don't know.

Speaker Change: To break it down but I can tell you we are.

Speaker Change: We're seeing things havent gotten that back we're seeing customers still signed contracts pay their bills.

Speaker Change: Certainly our larger customers have been paying.

Speaker Change: Even our small and medium size ones remember most of our smaller ones are on credit card payments.

Speaker Change: They kind of have to pay their bills medium ones, maybe it's the area, where you would see that kind of change if things got bad, but we haven't seen it yet.

Speaker Change: Okay, great. Thanks for taking my question.

Speaker Change: Thanks.

Robert Young: The next question comes from the line of Robert Young from Canaccord. Please go ahead.

Robert Young: Hi, yes, good evening.

Speaker Change: The comment you made about macro point, the real time visibility driving some share gains just given your coverage and the demand youre seeing there.

Speaker Change: Last quarter, you suggested that that was particularly a function of the shipper market and youre moving into their big retailers and manufacturers I.

Robert Young: I was curious if you could expand on that, maybe dig into that a little bit if that's what's going on. There's a little of that going on. I think the biggest thing is picking up more 3PLs and freight brokers and picking up more business from them as they consolidate. We tend to do business with almost all the big 3PLs and freight brokers in the country, and as some of the smaller or medium-sized guys close their doors, they're getting picked up by some of our bigger customers, such as the Robinsons and Conways of the world. That's been good for us.

Speaker Change: I was curious if you can expand on that maybe dig into that a little bit if that's what's going on.

Speaker Change: Theres a little of that going on I think the biggest thing is picking up more.

Speaker Change: <unk>.

Speaker Change: <unk>.

Speaker Change: Great brokers.

Speaker Change: And picking up more business from them as they consolidate we tend to do business with almost all the big <unk>.

Speaker Change: And.

Speaker Change: Freight brokers in the country and as some of the smaller or medium sized guys closed their doors are getting picked up by some of our bigger customers. The robinsons.

Speaker Change: One way is et cetera of the world convoys excuse me.

Ed Ryan: They go back to us because we have better data. We have track rates almost at 90%. 50s. And, you know, if you want to track all your shipments and you send them in and you only get to track half of them as your visibility solution provider, all that good. And if you send it in us and you track in 90% of them, I think you're pretty happy and you say, hey, that's a good guy to be with. And so when you buy up another small company, you tend to switch them over to us. Or when you have a contract with multiple players in the visibility space and you go to renegotiate those contracts, you tend to send most of the business to the guy that does the best.

Speaker Change: And that's been good for us.

Speaker Change: Back to <unk>.

Speaker Change: We have better data, we track rates almost at 90% of our competitors have track rates.

Speaker Change: <unk>.

Speaker Change: Now if you want to track all your shipments and you spend a minute and you only get to track half of them as your visibility solution provider all of that good and if you send and announced a new track in 90% of them. Thank.

Speaker Change: I think youre pretty happy and you say hey, that's a good that's a good got it.

Speaker Change: And so when we buy up on a small company you tend to switch them over to us or when you have a contract with multiple players in the visibility space and you go to renegotiate those contracts you tend to sell most of the business to.

Ed Ryan: And that's us. All right, and then in the call earlier, you said that you're not seeing any of the customers tripping their minimums on the transaction revenue. Was that was that a Q1 comment? Or is that, you know, as of today? And like, is there any pricing pressure at all that you're seeing? I would assume given that comment that there's not a lot of pricing pressure or pressure to renegotiate minimums, but maybe just expand on that. And then I'll pass it No, we're not seeing any yet. I don't think... I haven't heard anyone say we're in a recession yet, although we may hear three months from now that we are in one now, but I'm not seeing our customers in any kind of dire straits and we're not, I don't think I've seen anyone hit the bottom of their minimum.

Speaker Change: Got it the best and that's us.

Speaker Change: Alright, and then.

Speaker Change: In the call earlier, you said that youre not seeing any of the customers tripping their minimums on the transaction revenue.

Speaker Change: Was that was that a Q1 comment or is that as of today and is there any pricing pressure at all that youre seeing I would assume given that comment that there is not a lot of pricing pressure or pressure to renegotiate minimums.

Speaker Change: Can you just expand on that and then I'll pass the line.

Speaker Change: No we're not seeing any of that.

Speaker Change: I don't think.

Speaker Change: I haven't heard anyone say, we're in a recession yet although.

Speaker Change: We made here three months from now that we are in one now.

Speaker Change: Im not seeing our customers in any kind of dire Straits and we're not.

Speaker Change: I don't think Ive seen anyone hit the bottom there minimum their minimums are usually set at 85 or 90% of their.

Ed Ryan: Their minimums are usually set at 85 or 90% of their normal volume. and I haven't seen anyone of note his time.

Speaker Change: Their normal volume.

Speaker Change: And I haven't seen anyone have noted.

Robert Young: Great, thanks for the call. I'll pass the line. Thank you, Robert.

Speaker Change: Great. Thanks for the color I'll pass on.

Speaker Change: Thank you Rob.

Mark Schappel: The last question comes from the line of Mark Schappel from Loop Capital Markets. Please ask your question. Hi, thank you for taking my question.

Speaker Change: And the last question comes from the line of Marshall Paul from Loop capital markets. Please ask your question.

Marshall Paul: Alright. Thank you for taking my question I was wondering if you could just comment on the sentiment you're seeing from <unk> with respect to moving forward with large Tms upgrades expansions and are you are you seeing.

Ed Ryan: Ed, I was wondering if you could just comment on the sentiment you're seeing from CIOs with respect to moving forward with large TMS upgrades or expansions, and are you seeing TMS upgrades actually being crowded out by other IT initiatives? I know we continue to see, and we've seen this for the last several years. you know the let's say the logistics and supply chain initiatives are rising to the top of the organizations because their importance has increased in the last 10 years really maybe even more specifically last five since the pandemic uh and I haven't seen any real change in that yet you know I think if the economy turned and it got worse uh you know you might start to see that even in our space but uh we haven't um we haven't seen it yet in our space our our subscription sales continue to go well we I don't think we had a record quarter this quarter subscription sales but we were close to the the high end of uh subscription sales over the last uh two years so happy that's the case now look if we go into recession you know that could change In the last year, we've had a lot of customers say stuff to us like, we've canceled a number of IT projects here.

Speaker Change: Tmo's Tms upgrades actually being crowded out by a variety of initiatives.

Speaker Change: I know, we've continued to see and we've seen this for the last several years.

Speaker Change: Let's say the logistics and supply chain initiatives are rising to the top of the organizations to get their importance has increased in the last 10 years really maybe even more specifically less five since the pandemic.

Speaker Change: And I haven't seen any real change in that yet I have to get the economy turned and it got worse you.

Speaker Change: You might start to see that even in our space, but.

Speaker Change: We haven't.

Speaker Change: We haven't seen it yet in our space our subscription sales continue to go well.

Speaker Change: I don't think we had a record quarter this quarter subscription sales, but we were close to the high end.

Speaker Change: Subscription sales over the last.

Speaker Change: Two year so happy.

Speaker Change: Thats the case I look if we go into recession that could change.

Speaker Change: And the last year, we've had a lot of customers today stuff to us like we've canceled a number of our projects here, we're not canceling yours, because it's important but that always catches my attention because I think if things got a little worse it might catch us too.

Ed Ryan: We're not canceling yours because it's important. But, you know, that always catches my attention because I think if things got a little worse, it might catch us too. But that has not happened yet. Thank you. Thank you, Mark. There are no further questions at this time.

Speaker Change: That has not happened yet.

Speaker Change: Thank you.

Speaker Change: Thank you Mark.

Speaker Change: There are no further questions at this time I'd like to turn the call over to Mr. Ed Ryan for closing comments, Sir. Please go ahead.

Ed Ryan: I'd like to turn the call over to Mr. Ed Ryan for closing comments. Sir, please go ahead. Hey, great guys. Thanks for your time. I'll be on the street in the coming weeks. We look forward to seeing a lot of you and otherwise look forward to reporting back to you on RQ2 here in September of this year. Thanks, guys.

Speaker Change: Okay, great guys. Thanks for your time.

Speaker Change: In the coming weeks, we look forward to seeing a lot of you.

Speaker Change: Otherwise look forward to reporting back to you.

Speaker Change: On our Q2 here in September this year, thanks, guys.

Operator: This concludes today's conference call. Thank you very much for your participation.

Speaker Change: This concludes today's conference call. Thank you very much for your participation you may now disconnect.

Operator: You may now disconnect.

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Good afternoon, ladies and gentlemen, and welcome to the Descartes Systems Group Quarterly Results Conference Call. At this time, all lines are in list and only mode. Following the presentation, we will conduct a question-and-answer session. If at any time during this call you require immediate assistance, please press star zero for the operator.

Speaker Change: Good afternoon, ladies and gentlemen, and welcome to the Descartes Systems Group quarterly results Conference call.

Speaker Change: At this time all lines are in listen only mode.

Speaker Change: Following the presentation, we will conduct a question and answer session.

Speaker Change: If at any time during this call you are acquiring needed assistance. Please press star zero for operator.

This call is being recorded on the Wednesday, June 4th, 2025. I would now like to turn the conference over to Mr. Scott Pagan. Please go ahead. Thank you and good afternoon everyone. Joining me on the call today are Ed Ryan, CEO, and Allan Brett, CFO. I trust that everyone has received a copy of our financial results press release that was issued earlier today. Portions of today's call, other than historical performance, include statements of forward-looking information within the meaning of applicable securities laws. These statements are made under the Safe Harbor provisions of those laws. These forward-looking statements include statements related to our assessment of the current and future impact of geopolitical, trade, tariff, and economic uncertainty on our business and financial condition.

Speaker Change: This call is being recorded in the line stay June Forest, playing 25, I would now like to turn the conference over to Mr. Paul Peng. Please go ahead.

Speaker Change: Thank you and good afternoon, everyone. Joining me on the call today are Ed Ryan CEO, and Allan Brett CFO and I Trust that everyone has received a copy of our financial results press release that was issued earlier today.

Speaker Change: Purchases of today's call other than historical performance include statements of forward looking information within the meaning of applicable securities laws.

Speaker Change: These statements are made under the safe Harbor provisions of those laws.

Speaker Change: Okay.

Speaker Change: These forward looking statements include statements related to our assessment of the current and future impact of geopolitical trade tariff and economic uncertainty on our business and financial condition.

Descartes Operating Performance, Financial Results and Condition, Cash Flow and Use of Cash. Business Outlook, Baseline Revenues, Baseline Operating Expenses, and Baseline Calibration. Anticipated and Potential Revenue Losses and Gains, Anticipated Recognition and Expensing of Specific Revenues and Expenses, Potential Acquisitions and Acquisition Strategy, Cost Reduction and Integration Initiatives, and other matters that may constitute forward-looking statements. These forward-looking statements involve known and unknown risks, uncertainties, assumptions, and other factors that may cause the actual results, performance, or achievements of Descartes to differ materially from the anticipated results, performance, or achievements implied by such forward-looking statements. These factors are outlined in the press release and in the section entitled certain factors that may affect future results in documents filed and furnished with the SEC, the OSC, and other securities commissions across Canada, including our management's discussion and analysis filed today.

Speaker Change: Descartes operating performance financial results and condition.

Speaker Change: Cash flow and use of cash business outlook baseline revenues baseline operating expenses and baseline calibration.

Speaker Change: The anticipated and potential revenue losses, and gains anticipated recognition and expensing of specific revenues and expenses.

Speaker Change: Potential acquisitions and acquisition strategy cost reduction and integration initiatives and other matters that may constitute forward looking statements.

Speaker Change: These forward looking statements involve known and unknown risks uncertainties assumptions and other factors that may cause the actual results performance or achievements of descartes to differ materially from the anticipated results performance or achievements implied by such forward looking statements.

Speaker Change: These factors are outlined in the press release and in the section entitled certain factors that may affect future results in documents filed and furnished with the SEC.

Speaker Change: OSC and other securities commissions across Canada, including our management's discussion and analysis filed today.

We provide forward-looking statements solely for the purpose of providing information about management's current expectations and plans relating to the future. Your caution that such information may not be appropriate for other purposes. We don't undertake or accept any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements to reflect any change in our expectations or any change in events, conditions, assumptions, or circumstances on which any such statement is based, except as required by law.

Speaker Change: We provide forward looking statements solely for the purpose of providing information about management's current expectations and plans relating to the future.

Speaker Change: You are cautioned that such information may not be appropriate for other purposes.

Speaker Change: We don't undertake or accept any obligation or undertaking to release publicly any updates or revisions to any forward looking statements to reflect any change in our expectations or any change in events conditions assumptions or circumstances on which any such statement is based except as required by law.

And with that, let me turn the call over to Ed. Hey, thanks, Scott, and welcome everyone to the call. Today, we're reporting strong first quarter revenues and annual adjusted EBITDA growth consistent with our plans in very challenging and uncertain market conditions for our customers. We're excited to go over these results with you and give you some of our perspective on the current business environment, but first, let me give you a word, Matt, for the call. I'll start by hitting some highlights of last quarter and some aspects of how our business performed. I'll then hand it over to Allan, who will go over the Q1 financial results in more detail.

Speaker Change: With that let me turn the call over that.

Speaker Change: Okay. Thanks, Scott and welcome everyone on the call today, we are reporting strong first quarter revenues and annual adjusted EBIT growth consistent with our plans and very challenging and uncertain market conditions for our customers.

Speaker Change: We're excited wherever these results with you and give you some of our perspective on the current business environment, but first let me give you a roadmap protocol.

Speaker Change: I'll start by hitting some highlights of last quarter and some aspects of how our business performance I will then hand, it over to Alan who will go over the Q1 financial results in more detail.

After that, I'll come back and provide an update on how we see the current business environment and how our business was calibrated for Q2, and we'll then open it up to the operator to coordinate the Q&A portion of the call. Let's start with the first quarter that ends April 30. Key metrics we monitor include revenues, profits, cash flow from operations, operating margins, and returns on our investments. For this past quarter, we again had very good performance in each of these areas. Total revenues were up 12% from a year ago, with services revenues up 14% from a year ago.

Speaker Change: After that I'll come back and provide an update on how we see the current business environment and how our business was calibrated for Q2, and we will then open it up to the operator to coordinate the Q&A portion of the call.

Speaker Change: Well, let's start with the first quarter that ended April 30.

Speaker Change: Key metrics. We monitor include revenues profits cash flow from operations operating margins and returns on our investments for this past quarter. We again had very good performance in each of these areas.

Speaker Change: Total revenues were up 12% from a year ago with services revenues up 14% from a year ago.

Income from operations was up 9% from a year ago, with adjusted EBITDA up 12%. Our adjusted EBITDA margin was up one point from a year ago to 45%. We paid $115 million plus some restructuring costs to acquire 3G TMS, an acquisition I'll speak to later. We also generated almost $54 million in cash from operations in Q1, in a quarter where we also had payments to restructure 3G TMS immediately at closing. At the end of the quarter, we had more than $175 million in cash, and we were debt-free with an undrawn $350 million line of credit.

Speaker Change: Income from operations was up 9% from a year ago with adjusted EBITDA up 12%.

Speaker Change: Our adjusted EBIT margin was up one point from a year ago to 45%, we paid $115 million plus some restructuring cost to acquire three G. Tms Nash and acquisition I'll speak to later.

Speaker Change: We also generated almost $54 million in cash from operations in Q1 in a quarter, where we also have payments to restructure <unk> immediately at closing.

Speaker Change: At the end of the quarter, we had more than $175 million of cash and we were debt free with an undrawn $350 million line of credit we.

We remain well-capitalized, cash-generating, growing, and ready to continue to invest in our business. We had a few things that were the primary drivers of growth in our business, and I'll talk about each of these now. The first was in our transportation management area. First area of strength was in our transportation management pillar, in particular with our MacroPoint real-time visibility business. With so many challenges with goods that are moving across borders, solutions that help companies with more efficient domestic transportation moves have seen strong demand. We believe that we have the highest quality tracking service in the market, with a very high percentage of loads able to be tracked through our network due to our consistent focus on interacting with carriers and other transportation management systems to get status updates.

Speaker Change: We remain well capitalized cash generating growing and ready to continue to invest in our business.

Speaker Change: We had a few things that were the primary drivers of growth in our business and I'll talk about each of these now.

Speaker Change: <unk> was in our transportation management area.

Speaker Change: First area of strength within our transportation management pillar in particular with our macro point realtime visibility business with <unk>.

Speaker Change: Many challenges with goods that are moving across borders solutions that help companies with more efficient domestic transportation moves have seen strong demand. We believe that we have the highest quality tracking service in the market with a very high percentage of loads able to be tracked through our network.

Speaker Change: Our consistent focus on interacting with carriers and other transportation management systems to get status updates.

We're even leveraging AI technologies to help our customers track an even greater percentage of the loads. As we entered the quarter, we were seeing some of our strongest months ever in the macro point business against the backdrop of declining domestic truck moves in the United States. The recent MyCarrier portal acquisition also has been a great addition to the transportation management solution stack. There's been a lot of media and market attention on cargo theft and fraud, with criminal networks exploiting systems by creating fake carriers and accepting delivery loads to steal cargo and or get payment. MyCarrier portal helps identify this type of fraud by helping customers evaluate the legitimacy of carriers they're doing business with.

Speaker Change: We've been leveraging AI technologies to help our customers tracking even greater percentage of the world.

Speaker Change: As we ended the quarter, we were seeing some of our strongest months ever on the macro point business against the backdrop of declining domestic truck moves in United States.

Speaker Change: The recent Mike carrier portal acquisition also has been a great addition to the transportation management solution stack Theres been a lot of media market attention on cargo theft, and fraud with criminal networks, and supporting systems by creating big carriers and accepting delivery loads to steel.

Speaker Change: So <unk> get payment.

Speaker Change: Carrier portal helps identify this type of fraud by helping customers evaluate the legitimacy of carriers are doing business with.

We recently held a webinar with the California Highway Patrol to talk about the cargo fraud, and it was one of our highest attended events ever. MyCarrierPortal has been a great addition to the portfolio, allowing us to further distinguish ourselves in the transportation market. We also made another addition to our transportation management portfolio where we combined with 3G TMS in the latter part of this quarter. 3G has a traditional domestic transportation management system on a modern cloud architecture. With so many challenges in the international trade, making an investment in domestic transportation was logical for us. 3G also has strength in partial shipping, which is an excellent complement to our existing shipping solution.

Speaker Change: We recently held a women <unk> with the California Highway patrol to talk about the cargo fraud and it was one of our highest attended events ever.

Speaker Change: I reported has been a great addition to the portfolio, allowing us to further distinguish ourselves in the transportation market.

Speaker Change: We also made another addition to our transportation management portfolio, a portfolio, where we combined with <unk> Tms in the latter part of this quarter.

Speaker Change: <unk> has a traditional domestic transportation management system on a modern cloud architecture. So many challenges in the international trade, making investment in domestic transportation was logical for us through G. Also a strength in parcel shipping which is an excellent complement to our existing shipping solutions overall the acquisition to provide some great functionality to <unk>.

Overall, the acquisition provides some great functionality to our existing customers and allows 3G customers with access to our real-time visibility and fraud prevention solution. 3G did require some restructuring to put it on a path to the margins that Descartes prefers to operate at, which used some of our cash from operations in the quarter to get the business better positioned. In particular, with the acquisition happening near the end of the quarter, it meant that 3G didn't contribute much to our Q1 adjusted EBITDA and will require some operating history before it's fully integrated into our normal calibration.

Speaker Change: Listing customers and allows <unk> customers with access to a real time visibility and fraud prevention solutions.

Speaker Change: <unk> did require some restructuring to put it on a path to the margins that the cart prefers to operate at which used some of our cash from operations in the quarter to get the business better positioned in particular with the acquisition happened near the end of the quarter. It meant that <unk> didn't contribute much to our Q1 adjusted EBITDA and will require some operating history reports fully.

Speaker Change: Two integrated into our normal calibration.

Overall, transportation management grew well in a challenging environment. In the U.S. in particular, there's still a declining number of freight brokers and domestic truck moves. However, with our ability to become more efficient at tracking shipments and further distinguishing ourselves in the market, we've been able to grow with more track loads and more customers. Second area of strength was our global trade intelligence business. Tariff changes have been coming fast and furious, increases, decreases, pauses, commodity-specific tariffs. It's been a very busy time for our tariff group. Our customers are adjusting almost daily to a new tariff environment, and they need to know that they've got a timely and accurate information source to make their decisions with.

Speaker Change: Overall transportation management grew well in a challenging environment in the U S. In particular, there is still a declining number of freight brokers and domestic truck moves however, with our ability to become more efficient at tracking shipments and further distinguishing ourselves in the market, we've been able to grow with more track loads and more customers.

Speaker Change: Second area of strength was our global trade intelligence business tariff changes have been coming fast and furious increases decreases pauses commodity specific tariffs. It's been a very busy time for our tower group our customers are adjusting almost daily to a new tariff environment and then you can know that they've got a timely and accurate information source to.

Speaker Change: Make their decisions with in addition.

In addition, our customers are researching how other companies are handling the changes, so our data mining research tools are in high demand so that no customer gets left behind. Our best marketing tool is every mention of tariffs in news headlines, so it's an area of strength in the quarter. The third area was Customs and Regulatory Compliance. These are primarily customs and security filings related to shipments crossing borders. A couple of things contributed to growth here. First, there were some newer import control system requirements in the EU that have driven demand for solutions to comply. Second, we saw some lumpy filing blips in the market as people rushed imports to get ahead of the pending tariffs, or alternatively, to take advantage of temporary tariff reprieves.

Speaker Change: And our customers are researching how other companies are handling the changes so our data mining research tools are in high demand. So that no customer gets left behind our best marketing tool is every mention of tariffs and news headlines. So it's an area of strength in the quarter.

Speaker Change: The third area was customs and regulatory compliance.

Speaker Change: These are primarily customs and security filings related to shipments crossing borders a couple of things contributing to growth here first there were some newer import control system requirements in the EU that have driven demand for solutions to comply secondary.

Speaker Change: Second we saw some lumpy finally blips in the market as people rushed imports to get ahead of the pending tariffs or alternatively to take advantage of temporary tariff for crews.

This part of our business is strong as long as shipments aren't moving. However, one area the business has seen a bunch of change is the import of small packages into the United States, otherwise known as the minimus shipment. The U.S. had a filing mechanism called Type 86 that allowed low-value shipments under $800 to come into the United States on a tariff-free basis. That exemption and filing mechanism was used most often by Chinese e-commerce retailers who were selling into the United States. The U.S. has stopped the evaluability of that exemption for China, meaning there are tariffs duties that now need to be paid on those shipments.

Speaker Change: As part of our business is strong as long as shipments are moving.

Speaker Change: However, one area of the business has seen a bunch of change is the import of small packages in the United States.

Speaker Change: Otherwise known as de Minimis shipments.

Speaker Change: <unk> had a filing mechanism called type 86 that allow low value shipments under $800 to come into the United States on the tariff free basis that exemption and filing Maxim mechanism was used most often by Chinese e-commerce retailers, who are selling into the United States U S has stopped the availability of that exemption for China.

Speaker Change: There are tariffs duties that now need to be paid on those shipments. So in that business. We saw an influx of activity and type 86 before the tariff exemption disappeared on may 2nd after the quarter. Since then we seem to be a temporary pause from some larger foreign e-commerce vendors as they determine how to best import goods to the United States under the new procedures.

So in that business, we saw an influx of activity in Type 86 before the tariff exemption disappeared on May 2nd, after the quarter. Since then, there seemed to be a temporary pause from some larger foreign e-commerce vendors as they determined how to best import goods to the United States under the new procedures, and then a resumption of imports under a more traditional import measure, Type 11 or Type 1 violence, with tariffs being paid in this case. We can handle those traditional import processes in high volumes, so we saw good demand from e-commerce vendors to move to our alternative filing solutions, including some large competitive wins from other vendors.

Speaker Change: And then a resumption of imports under a more traditional important measure.

Speaker Change: 11 of our type one filings with tariffs being paid in this cadence.

Speaker Change: We can handle those traditional import processes and high volumes. So we saw good demand from e-commerce vendors to move or to our alternative finance solutions.

Speaker Change: Including some large competitive wins from other vendors.

Speaker Change: Okay.

So those were the areas that had the largest impact on our growth in the quarter. However, the broader macro environment was very challenging for our customers. At its heart, the global trade environment has caused uncertainty for customers, often paralyzing their decision-making. We saw shipment volumes down in various modes of transportation, particularly in the U.S. to China trade and West Coast ports. We saw e-commerce vendors who import from China struggling with sourcing and or whether to pass tariff changes on to their own customers. We saw the broader market struggling with the potential broader inflationary impact of tariffs on the U.S.

Speaker Change: So those are the areas that had the largest impact on our growth in the quarter. However, the broader macro environment was very challenging for our customers at its heart. The global trade environment has caused uncertainty for customers often paralysing their decision, making we saw shipment volumes down in various modes of transportation, particularly in the U S. China trade and West Coast ports, we saw each.

Speaker Change: Commerce vendors, who import from China struggling with sourcing <unk>, whether the past tariff changes onto their own customers.

Speaker Change: Saw the broad broader market struggling with the potential broader inflationary impact of tariffs on the U S economy, we saw several domestic economies looking at recessionary economic statistics.

economy. We saw several domestic economies looking at recessionary economic statistics.

Without uncertainty in the global trade market and the economy in general, we took steps in May to reduce our costs by completing a restructuring that impacted about 7% of our workforce. We did this to put ourselves in the best position to grow during this challenging environment. Those who followed our business over past years will know that we take our commitment to continue adjusted even to growth very seriously. These cost reductions were to prepare our business for any further challenges our customers may face in this uncertain market. We restructured our business from a position of strength, and our company is now in a position to grow consistent with our plans and to be flexible enough to address challenges with our customers that they may face from global trade and or economic conditions.

Speaker Change: With that uncertainty in the global trade market and the economy in general we took steps and made to reduce our cost by completing our restructuring that impacted about 7% of our workforce. We did this to put ourselves in the best positioned to grow during this challenging environment, those who followed our business ever passengers will know that we take our commitment to continue.

Speaker Change: Adjusted EBIT growth very seriously these cost reductions were to prepare our business for any further challenges our customers may face in this uncertain market.

Speaker Change: We restructured our business from a position of strength and our company is now in a position to growth consistent with our plans and to be flexible enough to address challenges with our customers.

Speaker Change: They face from global trade and economic conditions, we did it because of similar approach has helped us weather past challenging business environments. We did it because it's what our stakeholders would expect us to do we restructured our business to be even stronger in the future.

We did it because a similar approach has helped us weather past challenging business environments. We did it because it's what our stakeholders would expect us to do. We restructured our business to be even stronger in the future. We are doing what you'd expect Descartes to do. In Q1, we posted strong double-digit annual growth in revenues and adjusted EBITDA consistent with our 10 to 15% annual adjusted EBITDA growth plan and consistent with the ramp-up we previously communicated that we expected to see over the year. We grew by acquisition by expanding our transportation management portfolio. We reduced our cost base to mitigate against potential future economic risks.

Speaker Change: Okay.

Speaker Change: We are doing what you would expect that the card to do one we posted strong double digit annual growth in revenues and adjusted EBITDA consistent with our 10% to 15% annual adjusted EBIT growth plan and consistent with the ramp up we previously communicated that we expected to see over the year. We grew by acquisition by expanding our transportation management portfolio we have.

Speaker Change: Reduced our cost base to mitigate against potential future economic risks, we did exactly what you would expect a car to do I am excited about where our businesses Q1 shows that we're on the right track for our plans for the year.

We did exactly what you'd expect Descartes to do. I'm excited about where our business is. Q1 shows that we're on the right track for our plans for the year. My thanks to all the Descartes team members for everything they've done to contribute to a great quarter and a great business.

Speaker Change: My Thanks to all of the Descartes team members for everything they've done to contribute to a great quarter and great business and with that I'll turn the call over to Alan to go through our Q1 financial results in more detail.

And with that, I'll turn the call over to Allan to go through our Q1 financial results in Mordecai. Allan? Okay, thanks, Ed. As indicated, I'm going to walk you through our financial highlights of our first quarter, which ended on April 30th. Revenues came in at $168.7 million in the quarter, an increase of approximately 11.5% from revenues of $151.3 million in Q1 of last year. Revenue from the acquisitions completed in the back half of last year, as well as the acquisition of 3G TMS completed earlier in the first quarter, contribute nicely to our revenue this quarter, while growth from new and existing customers also contributed, including revenues.

Alan: Okay. Thanks, Ed has indicated I'm going to walk you through our financial highlights of our first quarter, which ended on April 30.

Alan: Revenues came in at $168 7 million in the quarter, an increase of approximately 11, 5% from revenues of $151 3 million in Q1 of last year.

Speaker Change: Revenue from the acquisitions completed in the back half of last year as well as the acquisition of <unk> completed earlier in the first quarter contributed nicely to our revenue this quarter, while growth from new and existing customers also contributed including revenues revs.

revenue growth in our global trade intelligence solutions and our macropoint free visibility solutions. Consistent with past quarters, our revenue mix in the quarter continued to be very strong with services revenue increasing 13.6% to $156.6 million and coming in at 93% of revenue in the first quarter. Licensed revenues were again minor at less than 1% of revenue in the quarter, while professional services and other revenue came in at $11.8 million or 7% of revenue, down 9% from $13.0 million in the same period last year, mainly due to a decline in safety training activity in our ground cloud business.

Speaker Change: Revenue growth in our global trade intelligence solutions, and our macro point trade visibility solution.

Speaker Change: Consistent with past quarters, our revenue mix in the quarter continued to be very strong with services revenue, increasing 13, 6% to $156 6 million and coming in at 93% of revenue in the first quarter.

Speaker Change: License revenues were again minor at less than 1% of revenue in the quarter, while professional services and other revenue came in at $11 8 million or 7% of revenue down.

Speaker Change: Down 9% from 13.0 million in the same period last year.

Speaker Change: Mainly due to a decline in safety training activity in our ground cloud business in Q1 last year, we had a sharp increase in the safety training revenue. This is because most of our ground cloud Fedex carriers need to recertify. Their training every 24 months. So this revenue stream tends to be quite lumpy with increases every other year and this.

In Q1 last year, we had a sharp increase in the safety training revenue. This is because most of our ground cloud FedEx carriers need to recertify their training every 24 months. So this revenue stream tends to be quite bumpy with increases every other year and this being an off year for our safety training service. Outside of GroundCloud, professional services revenues were generally flat with the first quarter of last year. In addition, there was also a slight decrease of just over half a million in revenue this quarter from foreign exchange changes. As despite its more recent weakness, the U.S.

Speaker Change: Being an off year for our safety training services.

Speaker Change: Outside of ground cloud professional services revenues were generally flat with the first quarter of last year.

Speaker Change: In addition, there was also a slight decrease of just over half a million dollars in revenue this quarter from foreign exchange changes.

Speaker Change: As despite its more recent weakness of the U S. Dollar was stronger against the Euro the Canadian dollar and the British pound in Q1 compared to the same quarter last year.

dollar was stronger against the Euro, the Canadian dollar, and the British pound in Q1 compared to the same quarter last year. We estimate that our growth in services revenue without the impact of recent acquisition or foreign exchange changes would have been approximately 4% in the first quarter. Gross margin for the first quarter came in at 76.4% of revenue this year, down very slightly from gross margin of 76.6% realized in the first quarter last year. With continued operating leverage, our operating expenses increased less than the increase of sales, going by approximately 10.4% in Q1 over the same period last year, primarily related to the impact of acquisitions that were completed in the back half of last year.

Speaker Change: We estimate that our growth in services revenue without the impact of recent acquisition of foreign exchange changes would have been approximately 4% in the first quarter.

Speaker Change: Gross margin for the first quarter came in at 76, 4% of revenue this year down very slightly from gross margin of 76, 6% realized in the first quarter last year.

Speaker Change: With continued operating leverage our operating expenses increased less than the increase of sales growing by approximately 10, 4% in Q1 over the same period last year.

Speaker Change: <unk> related to the impact of acquisitions that were completed in the back half of last year.

As a result of the higher revenues and our continued offering leverage on expenses, we saw adjusted EBITDA grow by 12.1% to $75.1 million or 44.5% of revenue in the quarter, which was up from $67.0 million or 44.3% of revenue in the first quarter last year. From my GAAP earnings perspective, net income came in at $36.2 million, up 4% from net income of $34.7 million in the first quarter last year, and this is despite higher amortization costs and other financial charges related to our recent acquisition. Cash flow generated from operations came in at $53.6 million, or approximately 71% of adjusted EBITDA in the first quarter, down from operating cash flow of $63.7 million, or 95% of adjusted EBITDA in Q1 last year.

Speaker Change: As a result of the higher revenues and our continued operating leverage on expenses. We saw adjusted EBITDA grow by 12, 1% to $75 1 million or <unk> 44, 5% of revenue in the quarter, which was up from 67.0 million or <unk> 44, 3% of revenue in the first quarter last year.

Speaker Change: From a GAAP earnings perspective, net income came in at $36 2 million up 4% from net income of $34 7 million in the first quarter last year and this was despite higher amortization costs and other financial charges related to our recent acquisitions.

Speaker Change: Cash flow generated from operations came in at $53 6 million or approximately 71% of adjusted EBITDA in the first quarter down from operating cash flow of $63 7 million or 95% of adjusted EBITDA in Q1 last year.

Cash flow from operations was negatively impacted this quarter as we saw a slight increase in our days sales and receivable from an incredible 29 days of sales at the end of the fourth quarter back to 32 days sales and receivable at the end of Q1. Cash flow from operations was also impacted by some one-time acquisition related charges related to the 3G acquisition, as well as the payment of prior year annual bonus. As we had indicated on our conference call at the end of the fourth quarter, and as I mentioned earlier on the call, there is a lot of uncertainty out there in the global trade market, especially for our customers as they try to navigate these challenges.

Speaker Change: Cash flow from operations was negatively impacted this quarter as we saw slight increase in our days sales in receivable from an incredible 29 days of sales at the end of the fourth quarter to 30 to 32 days sales in receivable at the end of Q1.

Speaker Change: Cash flow from operations was also impacted by some onetime acquisition related charges related to the <unk> acquisition as well as the payment of prior year annual bonuses.

Speaker Change: As we had indicated on our conference call at the end of the fourth quarter and as Ed mentioned earlier on the call. There is a lot of uncertainty out there in the global trade market, especially for our customers as they try to navigate these challenges.

So we remain very pleased with these operating results against this uncertain freight market environment. If we look at the balance sheet, our cash balances totaled $176 million at the end of April, down from cash balances of $236 million at the end of January, as we used approximately $112 million of our cash balances to complete the 3G acquisition, while we continue to generate additional positive cash flow from operations. As a result, we still have the $176 million of cash, as well as $350 million available for us to draw under our credit facility for future acquisitions. We continue to be very well capitalized to allow us to consider all acquisition opportunities in our market, consistent with our business plan.

Speaker Change: So we remain very pleased with these operating results against this uncertain freight market environment.

Speaker Change: If we look at the balance sheet, our cash balances totaled $176 million at the end of April down from cash balances of 236 million at the end of January as we used approximately $112 million of our cash balances to complete.

Speaker Change: <unk> acquisition, while we continue to generate additional positive cash flow from operations.

Speaker Change: As a result, we still have the 176 million of cash as well as $350 million available for us to draw under our credit facility for future acquisitions, we continue to be very well capitalized to allow us to consider all acquisition opportunities in our market consistent with our business plan.

As we look towards the balance of our fiscal 2026, we should note the following. After spending approximately $1.9 million in capital additions in the first quarter, we expect to incur approximately $4 to $5 million in additional capital expenditures for the balance of this year, as our business will continue to be non-capital intensive. After incurring amortization costs of $19.1 million in Q1, we expect amortization expense will be approximately $60 million for the balance of the year, with this figure being subject to adjustment for foreign exchange changes and future acquisitions. Our tax rate in Q1 came in at 24.4% of pre-tax income, slightly lower than our expected range of 25-30%, and this was mainly a result of a few smaller tax benefits and recoveries realized in the first quarter.

Speaker Change: As we look towards the balance of our fiscal 2026, we should note the following.

Speaker Change: After spending approximately $1 9 million in capital additions in the first quarter, we expect to incur approximately $4 million to $5 million in additional capital expenditures for the balance of this year as our business will continue to be non capital intensive.

Speaker Change: After incurring amortization costs of $19 1 million in Q1, we expect amortization expense will be approximately $60 million for the balance of the year with this figure being subject to adjustment for foreign exchange changes and future acquisitions.

Speaker Change: Our tax rate in Q1 came in at 24, 4% of pretax income slightly lower than our expected range of 25% to 30% and this was mainly a result of a few smaller tax benefits and recoveries realized in the first quarter.

Looking at the balance of the year, we currently expect our tax rate will trend much closer to our expected range in the next few quarters, meaning that our tax rate for the year is likely to end up in the range of between 24 and 28 percent of pre-tax income. So somewhere either side of our blended statutory tax rate of 26.5 percent. However, as always, we should add that our tax rate may fluctuate from quarter to quarter from one-time tax items that may arise as we operate internationally across multiple countries. After incurring stock-based compensation expense of $4.4 million in the past quarter, we currently expect stock compensation to be approximately $20 million for the remainder of fiscal 26, subject to any forfeitures of stock options or share units.

Speaker Change: Looking at the balance of the year. We currently expect our tax rate will trend much closer to our expected range for the next few quarters, meaning that our tax rate for the year is likely to end up in a range of between 24 and 28% of pre tax income so somewhere either side of our staff our blended statutory tax rate of 26, 5%.

Speaker Change: However, as always we should add that our tax rate may fluctuate from quarter to quarter from onetime tax items that may arise as we operate internationally across multiple countries.

Speaker Change: After incurring stock based compensation expense of $4 4 million in the past quarter. We are currently we currently expect stock compensation to be approximately $20 million for the remainder of fiscal 2006 subject to any forfeitures of stock options or share units.

As we have mentioned in the past few quarters, we have estimated that the payments of contingent consideration for our earner arrangements for the balance of this year will be approximately $2.3 million, subject to any necessary adjustments resulting from the final earner calculation. Going forward, subject to unusual events and quarterly fluctuations, we expect to continue to see solid cash flow conversion and expect our cash flow from operations to be between 80% and 90% of our adjusted EBITDA in the quarters ahead.

Speaker Change: As we have previously have we've mentioned in the past few quarters, we estimate that the payments of contingent consideration for earn out arrangements for the balance of this year will be approximately $2 $3 million subject to any necessary adjustments, resulting from the final earn out calculation.

Speaker Change: Going forward subject to unusual events or and quarterly fluctuations, we expect to continue to see solid cash flow conversion and expect our cash flow from operations between to be between 80, and 90% of our adjusted EBITDA in the quarters ahead.

And finally, as Ed indicated earlier in the call, given the economic and global trade uncertainty that many of our customers are facing, we have taken the steps to reduce our cost structure by reducing our global workforce by approximately 7% and eliminating various other offerings. As a result, we will be recording a restructuring charge of approximately $4 million in Q2 this year and would highlight that once completed, we would anticipate annual cost savings of approximately $15 million from our Q1 operating expense run. Quite simply, we remain committed to managing our business to grow our adjusted EBITDA by 10 to 15 percent.

Speaker Change: And finally as Ed indicated earlier in the call given the economic and global trade uncertainty that many of our customers are facing we are facing we have taken the steps to reduce our cost structure by reducing our global workforce by approximately 7% and eliminating various other operating expenses.

Speaker Change: As a result, we will be recording a restructuring charge of approximately $4 million in Q2 this year.

Speaker Change: And with highlight that once completed we would anticipate annual cost savings of approximately $15 million from our Q1 operating expense run rate.

Speaker Change: Simply we remain committed to managing our business to grow our adjusted EBITDA by 10% to 15%.

That remains our objective for the current fiscal year, despite the unique and tougher global trade environment we operate in.

Speaker Change: That remains our objective for the current fiscal year, despite the unique and tougher trade global trade environment, we operate in.

So with that, I'll turn it back to Ed to provide our baseline calibration for Q2. Great. Thanks, Allan. As I said earlier and last quarter, these are challenging business conditions for our Just some of the most recent changes include tariffs between the U.S. and China at record high levels, even with a temporary agreement to reduce those tariffs during the negotiation period. Allegations of violations of that temporary U.S.-China agreement, putting the temporary reduced tariff structure at risk. Increased U.S. tariffs on imports of steel. Imposition and suspension of tariffs on the EU. Challenges and appeals relating to the legality of U.S.

Speaker Change: So with that I'll turn it back to Ed to provide our baseline calibration for Q2, okay. Great. Thanks, Alan as I said earlier and last quarter. These are challenging business conditions for our customers. Just some of the most recent changes include tariffs between the U S and in China at record high levels, even with a temporary agreement to reduce those tariffs.

Speaker Change: The negotiation period.

Speaker Change: Allegations of violations of that temporary U S, China agreement, including the temporary reduced tariff structure at risk.

Speaker Change: <unk> U S tariffs on imports of steel and position and suspension of tariffs on the EU challenges and appeals relating to the legality of U S. Tariffs warning warnings to countries that temporarily temporary tariff relief measures will expire at new trade agreements with the U S aren't reached by early July.

tariffs. Warnings to countries that temporary tariff relief measures will expire if new trade agreements with the U.S. aren't reached by early July. Heightened tensions in the war in Ukraine and corresponding sanctions. A new Postmaster General at the U.S. Postal Service with potential changes in policies and service. So that's a lot. Our customers can deal with change. Businesses and supply chains are adaptable. However, what's more challenging than change is uncertainty. It's very difficult for our customers to make decisions, especially long-term ones, when there's no certainty on how or when the landscape will change. But just a belief that it will.

Speaker Change: Heightened tensions in the war in Ukraine, and corresponding sanctions new postmaster general.

Speaker Change: U S postal service with potential changes in policies and services, so thats a lot.

Speaker Change: Our customers can deal with change businesses supply chain Saar adaptable, however, what's more challenging than changes uncertainty, it's very difficult for our customers to make decisions, especially long term loans when there's no certainty on how or when the landscape will change, but just the belief that it will.

When our customers have difficulty predicting how their businesses will perform or be impacted, it becomes more challenging for us. I think we're starting to see some of that uncertainty impacting volumes in what feels like a pretty volatile shipping market. Domestic U.S. truck volumes remain depressed. Air shipments have been trending with modest growth but look to be under pressure. Ocean traffic has seen massive shifts in trade lanes and port activity with the pullback from China negatively impacting some ports and other ports benefiting from alternate sources. Each month, we prepare a global shipping report that monitors ocean imports into the U.S.

Speaker Change: When our customers have difficulty predicting how their businesses will perform or be impacted it becomes more challenging for us I think we're starting to see some of that uncertainty impacting volumes in what feels like a pretty volatile shipping market domestic U S truck volumes remain depressed air shipments had been trending with modest growth, but look to be under pressure Ocean trap.

Speaker Change: <unk> has seen massive shifts in trade lanes and productivity with the pullback from China are negatively impacting some ports and other courts benefiting from alternative sourcing.

Speaker Change: Each month, we prepare global shipping monitors ocean imports into the U S with data obtained from U S customs and border protection or report for May we will be coming out in the next few days and highlights then in the month of May use container imports declined following several months of growth falling 10% from April and 7% year over year.

with data obtained from U.S. Customs and Border Protection. Our report from May will be coming out in the next few days, and it highlights that in the month of May, U.S. container imports declined following several months of growth, falling 10% from April and 7% year-over-year. As part of that, import from China dropped sharply, down 21% from April and down 7% compared to May 2024. For Descartes, we've grown during challenging business conditions in the past. Our plan is to continue to do so again now. Some of those things that we believe put us in a good position to do that include we're diversified in domestic logistics and international logistics.

Speaker Change: As part of that import from China dropped sharply down 21% from April and down 7% compared to May 2024.

Speaker Change: For Descartes with grown during challenging business conditions in the past our plan is to continue to do so again now some of those things that we believe put us in a good position to do that include we're.

Speaker Change: We're diversified in domestic logistics and international logistics many of the changes right now impact international supply chains. However, we have great strength in domestic transportation moves in our routing and scheduling businesses transportation management and e-commerce and last mile businesses.

Many of the changes right now impact international supply chains. However, we have great strength in domestic transportation moves and are routing and scheduling businesses, transportation management and e-commerce and last mile business. We're particularly strong in the global trade intelligence business. We believe we can provide a ton of help to our customers in an environment where people are looking for information or help managing tariffs and duties. continually updating sanctioned party lists, thirsting for competitive intelligence, and dealing with increased export license complexity. We're diversified globally. We've got domestic transportation solutions that can be used around the world, and where there's shifting international trade relations, we have an established global logistics network that can be leveraged by our customers.

Speaker Change: We're particularly strong in the global trade intelligence business. We believe we can provide a ton of help to our customers in an environment, where people are looking for information or help managing tariffs and duties.

Speaker Change: Updating sanctioned party list thirsting for competitive intelligence and dealing with increased export license complexity.

Speaker Change: We're diversified globally, we've got domestic transportation solutions that can be used around the world and where they're shifting international trade relations. We have an established global logistics network that can be leveraged by our customers.

We've proactively taken steps to reduce our cost base to address potential revenue uncertainty. We have a total growth model. We have an extensive track record of acquisition activity to complement organic growth. Changing market conditions often provide us with even more opportunities to add solutions for our customers and grow by acquisition. We're well-capitalized. We have more than $175 million in cash and a $350 million underlying line of credit, and we are a cash-generating business. Ultimately, regardless of how well Descartes positioned, our success is determined by our ability to help our customers. Our customers remain uncertain about how these market conditions will impact their businesses.

Speaker Change: Proactively taken steps to reduce our cost base to address potential revenue uncertainty.

Speaker Change: We have a total growth model, we have an extensive track record of acquisition activity to complement organic growth changing market conditions, often provide us with even more opportunities to add solutions for our customers and grow by acquisition.

Speaker Change: We're well capitalized we have more than $175 million in cash and a $350 million Undrawn line of credit and we are a cash generating business.

Speaker Change: Ultimately, regardless of how well Descartes has positioned our success is determined by our ability to help our customers our customers remain uncertain about how these market conditions will impact their businesses. We're mindful of this and the impact of the changing global trade and foreign exchange environments, and setting our calibration and considering what our final <unk>.

We're mindful of this and the impact of the changing global trade and foreign exchange environments in setting our calibration and considering what our final quarterly financial results may be. In our quarterly report, we've provided a comprehensive description of baseline revenues, baseline calibration, and their limitations. As of May 26, the day we commence our cost reduction activities, using foreign exchange rates of 73 cents to the Canadian dollar, $1.14 to the euro, and $1.36 to the pound, we've estimated that our baseline revenues for the second quarter of fiscal 2026 were approximately $150.5 million, and our baseline operating expenses were approximately $92.5 million.

Speaker Change: <unk> financial results may be.

Speaker Change: In our quarterly report, we provided a comprehensive description of baseline revenues baseline calibration and their limitations as of May 26. The day, we commenced our cost reduction activities using foreign exchange rates of 73 to the Canadian dollar.

Speaker Change: $1 14 to the Euro and $1 36 to the parent we've estimated that our baseline revenues for the second quarter of fiscal 2026 were approximately $155 million and our baseline operating expenses were approximately $92 $5 million. We consider this to be our baseline adjusted EBIT calibration of approximately 50.

We consider this to be our baseline adjusted even to calibration of approximately $58 million for the second quarter of fiscal 2026, or approximately 39% of our baseline revenues as at May 26, 2025. We continue to expect that we'll operate in an adjusted EBITDA operating range of 40 to 45 percent. Our margin can vary in that range given such things as revenue mix, foreign exchange movements, and the impact of acquisitions as we integrate them into our business. These are uncertain times for our customers. It's a challenge for them to know what they can rely on in this global trade environment.

Speaker Change: The $8 million for the second quarter of fiscal 2026, or approximately 39% of our baseline revenues as at May 26 2025.

Speaker Change: We continue to expect that we will operate in an adjusted EBITDA operating range of 40% to 45% our margin can vary in that range, given such things as revenue mix foreign exchange movements and the impact of acquisitions as we integrate them into our business.

Speaker Change: These are uncertain times for our customers, it's a challenge for them to know what they can rely on in this.

Speaker Change: Global trade environment. Our goal is to continue to show our customers and other stakeholders that one thing that can rely on is descartes.

Our goal is to continue to show our customers and other stakeholders that one thing they can rely on is Descartes.

Thank you everyone for joining us on the call today. As always, we're available to talk to you about our business in whatever manner is most convenient for you.

Speaker Change: Thank you to everyone for joining us on the call today as always we're available to talk to you about our business in whatever manner is most convenient for you and with that operator, I will turn it over to you for Q&A portion of the call.

And with that, operator, I'll turn it over to you for the Q&A portion of the call.

Speaker Change: Yes.

Thank you very much.

Speaker Change: Thank you very much ladies and gentlemen, we will now begin the question and answer session should you have a question. Please press star followed by the number one on your Touchtone phone, you'll hear a prompt that Johan has been raised.

Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star followed by the number one on your touchtone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press star followed by the number 2. If you are using a speakerphone, please make sure to lift your handset before pressing any keys. Your first question comes from the line of Dylan Becker from William Blair. Please go ahead. Hey guys, it's Jackson Bogli on for Dylan Becker. So I was just curious about the workforce reduction.

Speaker Change: Should you wish to decline from the polling process. Please press star followed by number two.

Speaker Change: We are using a speaker phone please make sure to lift your handset before pressing any keys.

Speaker Change: Your first question comes from the line of <unk> Becker from William Blair. Please go ahead.

Becker: Hey, guys.

Speaker Change: Jackson, Bob Lee on for Doug Becker. So I was just curious about the workforce reduction and if there was any additional color that you'd give on maybe what areas.

And if there's any additional color that you would give on maybe what areas that was cut out of and how you're thinking about going forward those levers that you'll see in the business. Thanks. Thanks, Jackson. Yeah, it was generally across the board, and across the board not only for functional areas, but geographically. It was about a little under 200 people in our business, unfortunately, and we did it to make ourselves a healthier business going forward and put ourselves in a position where we can continue to make the kind of margins that the street has come to expect from us in running our business on a daily basis.

Speaker Change: That was cut out of and how youre thinking about going forward those are <unk>.

Speaker Change: Levers that youll see in the business. Thanks.

Jackson Bouley: Thanks Jackson.

Jackson Bouley: Yes, it was generally across the board and across the board not only for functional areas, but geographically.

Speaker Change: Little under 200 people in our business.

Speaker Change: Fortunately and we did it.

Speaker Change: We ourselves are healthier business.

Speaker Change: Going forward and put ourselves in a position where we can continue to make the kind of margins that.

Speaker Change: That the street has come to expect from us.

Speaker Change: In.

Speaker Change: Running our business on a daily basis.

Things like AI have helped us maybe make some of these cuts a little easier, but at the end of the day, we thought it was the right thing to do and to prepare for the uncertainty that I just talked about. Great, thank you. Thank you, Jeff. Your next question comes from the line of Paul Treiber from RBC Capital Markets. Please go ahead. Thanks very much. Just a question on organic services growth. You mentioned it was 4% this quarter. I think last quarter was 6%. You did a good job calling out some of the stronger growing areas of the business, but what did you see that were headwinds or what segments were softer that were...

Speaker Change: Things like AI and helped us.

Speaker Change: Maybe make.

Speaker Change: Some of these cuts a little easier, but the end of the day, we thought it was the right thing to do and to prepare for the uncertainty that I just talked about.

Speaker Change: Great. Thank you.

Jeff: Thank you Jeff.

Speaker Change: Your next question comes from the line of Paul Treiber from RBC capital markets. Please go ahead.

Speaker Change: Oh, thanks very much.

Speaker Change: Hi, just a question on organic services growth you mentioned was 4% this quarter I think last quarter was 6% you did a good job calling out some of the stronger growing areas of the business, but what what did you see that were headwinds what segments were softer.

Speaker Change: That were.

We're a drag on organic services growth this quarter. As you might expect, a lot of the uncertainty that was going on led to big movements in transaction volumes. We did all right in some of the areas. I mentioned some of the customs filing, security filing areas that we did okay in, but certainly Ocean was down. Truck continues in a bit of a depressed state. We did all right on MacroPoint, but maybe some of the other areas within truck messaging not as well. And, you know, I think that's a result of the tariffs that the people aren't sure what to do and they freeze.

Speaker Change: Were a drag on organic services growth this quarter.

Speaker Change: And as you might expect it was.

Speaker Change: A lot of the uncertainty that has gone on led to.

Speaker Change: Big movements in.

Speaker Change: And transaction volumes.

Speaker Change: Some of the areas I mentioned some of the customers bond security found areas that we can.

Speaker Change: Certainly ocean was down truck.

Speaker Change: Cedar continues in a bit of a depressed state.

Speaker Change: We did alright on macro point, but maybe some of the other areas within truck messaging not.

Speaker Change: And that as well.

Speaker Change: And I think Thats, a result of the tariffs.

Speaker Change: If people aren't sure what they do and they freeze and.

And, you know, 31% of our business or so is that transaction revenue. And, you know, of course, we have underlying minimums that are a backstop against that. But, you know, the customers weren't getting down to their minimums. They were just doing a little less than they used to. Overall, we're pretty happy with how we performed, given that, if you heard our last call, you know, there was probably even more uncertainty coming into that call. A lot of stuff has changed since then. And, you know, we thought the company performed pretty well during that time, made up for some of, you know, some areas that were getting hit with some areas that were doing pretty well, like the macro point and, you know, the content businesses that I talked about at the beginning of the call.

Speaker Change: 31% of our business or so is that transaction revenue and of course, you have underlying minimums.

Speaker Change: That.

Speaker Change: Backstop against that but.

Speaker Change: The customers won't get down to their minimums that are just doing a little less than they used to.

Speaker Change: Overall, we're pretty happy with how we performed given after you heard our last call.

Speaker Change: Yes.

Operator: There's probably even more uncertainty coming into that call last of change since then.

Speaker Change: And.

Speaker Change: We thought the company performed pretty well during that time, we made up for some of them.

Speaker Change: Some areas are we're getting hit with some some areas that we're doing pretty well like the macro point.

Speaker Change: And the content business as I talked about at the beginning of the call.

That's helpful to understand. Have you seen a change in either renewal rates or, I guess, conversion of sales pipeline as a result as well? Not much, actually, although we might anticipate that could happen if this keeps up. You know, we've continued to have good sales momentum with the subscription deals that we have always done pretty well at, that continue to keep up. You know, I think we haven't seen, you know, customer defections or people spending significantly less money with us or trying to change the terms of their contract, but we've got to see what happens in the economy.

Speaker Change: That's helpful to understand the how have you seen a change in either renewal rates or.

Speaker Change: I guess conversion.

Speaker Change: Sales pipeline as a result as well.

Speaker Change: Not much actually although we might anticipate that could happen if this keeps up.

Speaker Change: We've continued to have good sales momentum.

Speaker Change: With the.

Speaker Change: With the train.

Speaker Change: Subscription deals that we that we have.

Speaker Change: We have always done pretty well.

Speaker Change: <unk> continued to keep up.

Speaker Change: I think we haven't seen customer.

Speaker Change: Customer defections are people spending significantly less money with us or trying to change the terms of their contract.

Speaker Change: But we got to see what happens in the economy those things happen when the economy turns down.

Those things happen when the economy turns down. You know, I haven't seen yet where the economy's going, and probably a lot of it has to do with how quickly does this end? You know, does the U.S. negotiate an end to a lot of these tariff situations with the countries where they just delayed them 90 days? Do they delay another 90 days or something like that? You know, what happens with the China negotiation? Things like that are the balls that are up in the air that have us say, you know, we're not sure what's going to happen next.

Speaker Change: Haven't seen yet where the economy's going probably.

Speaker Change: A lot of it has to do with how quickly does this end.

Speaker Change: Does the U S negotiated and do a lot of these tariff situations with the with the countries, where they just delayed 90 days to date delay another 90 days or something like that.

Speaker Change: What happens with the China negotiation things like that are the balls that are up in the air that having us say, we're not sure what's going to happen next.

In the meantime, you know, you know us as conservative operators. that are, you know, we got to weather the storm and, you know, cut our costs and try to run our business as efficiently as we can under the circumstances. And then just lastly, just on on 3G TMS, the, you know, contribute, I think, 2.4 million in the quarter. Is that a normal runway rate to assume going forward? And then can you just confirm that it's not reflected in the baseline? No, from a baseline perspective, Paul, we've, I mean, typical with us with acquisitions, I mean, we're getting to know that business, we're getting to know the renewal rates and renewal times, etc.

Speaker Change: In the meantime.

Speaker Change: This conservative operators.

Speaker Change: We got to weather the storm and.

Speaker Change: Cut our costs and try to run our business as efficiently as we can under the circumstances.

Speaker Change: And then just lastly, just on an <unk> Tms.

Speaker Change: It contributed $2 4 million in the quarter is that a normal runway rate to assume going forward and then can you just confirm that it's not reflected in the baseline.

Speaker Change: No from a baseline perspective Paul.

Speaker Change: Typical with us with acquisitions I think we're getting to know that business forget they can know the renewal rates and Jim and at renewal times et cetera. So we've we've incorporated.

So we've incorporated conservatively, you know, incorporate that into the baseline right now. So it is reflected in the baseline. Again, pretty typical as we get to know businesses more, we've owned that business for two months now. So we'll perfect that. I think we said that in the prepared remarks that it's, it is, you know, for the most part reflected in baseline calibration. Thanks for taking our questions. Your next question comes from the line of Raimo Lenschow from Barclays. Please go ahead. Thank you. Ed, you've seen downturns before. How do you compare what you're seeing at the moment with other ones?

Speaker Change: Conservatively.

Speaker Change: Corporate that into the baseline right now.

Speaker Change: So it is reflected in baseline again pretty typical as we get to know businesses more we've had we've owned that business for two months now so.

Speaker Change: Perfect that I think we said that in the prepared remarks.

Speaker Change: It is.

Speaker Change: For the most part reflected in baseline calibration.

Speaker Change: Okay.

Speaker Change: Okay. Thanks for taking my questions.

Speaker Change: Great. Thanks, Paul.

Speaker Change: Your next question comes from the line of Raimo <unk> from Barclays. Please go ahead.

Speaker Change: Perfect. Thank you.

Speaker Change: Yeah.

Speaker Change: We've seen downturns before.

Speaker Change: How do you compare what you're seeing at the moment.

Speaker Change: <unk>.

in like 2000, 2002, 2023. you know, earlier, like, you know. Yeah. I mean, at the moment, it doesn't feel as bad. But what's interesting is I think there's a lot more uncertainty right now. People don't know what's going to happen. I think in the pandemic, it may not have known what's going to happen right away, but they were preparing for the worst in the pandemic for everything to shut down. And it turns out it got better pretty quickly. You know, in 08, I think people really prepared for the worst. And there really was a bad situation for about a year until government stepped in and started pumping more money into the economy.

Speaker Change: 2020 to enter your kind of 23.

Speaker Change: Ernie.

Speaker Change: Okay.

Speaker Change: I mean at the moment it doesn't feel as bad but what's the experience I think there's a lot more uncertainty right now people don't know what's going to happen I think in the pandemic. It may not have known what's going to happen right away, but they were preparing for the worst and the pandemic for everything to shutdown and it turns out.

Speaker Change: Pretty quickly.

Speaker Change: I think people really prepared for the worst and that really was a bad situation for about a year.

Speaker Change: Until government stepped in and start pumping more money in the economy.

And, you know, we were not only in a recession, but a depression. Right now, I think it's hard to identify what we're in, right? Are we in a recession right now? Are we close to one? Does all this go away if the tariffs get renegotiated or if, you know, the final analysis that, you know, you're not allowed to change all these tariffs? You know, we just have to see. There's a lot of balls in the air, and our customers, I think, don't know what to do. And, you know, they're still shipping stuff, and certainly not everything ships to and from the United States.

Speaker Change: We were not only in a recession, but a depression right now I think it's hard to identify what were in radar. We in a recession right now are we close to one.

Speaker Change: All of this go away if the tariffs.

Speaker Change: Get renegotiated or.

Speaker Change: The final analysis that youre not allowed to change all these tariffs I now accept a seasonal high balls in the air and our customers I think don't know what to do.

Speaker Change: And.

Speaker Change: Theres still ship and stuff, but.

Speaker Change: Not everything ships to and from the United States as lots of other stuff shipping around the world other locations that we benefit from as well, but U S is obviously a big portion.

There's lots of other stuff shipping around the world, other locations that we benefit from as well. But the U.S. is obviously a big portion of the world's, you know, container volume and shipment volume. And, you know, we're kind of behaving as you might expect us to do. We're going to be conservative and manage our business to keep making money, you know. We mentioned on the call, like, we're a total growth model. You know, we see this as if things get worse, we see this as an opportunity to keep making money and use that money to buy up competitors that might not be in as good a position as us.

Speaker Change: Of the worlds.

Speaker Change: Container volume and shipment volume.

Speaker Change: And we're kind of behavior.

Speaker Change: As you might expect it to us to do we're trying to be conservative and manage our business to keep making money now.

Speaker Change: We mentioned on the call it where total growth model.

Speaker Change: We see this as things.

Speaker Change: If things get worse, we see this as an opportunity to keep making money and use that money to buy up competitors that might not be as good a position as us.

So, you know, we're just watching what's going on like everybody else and trying to run our company the best through it. It doesn't seem like dire circumstances, not yet at least. If I had to down turns we've had, but, you know, I don't know either for sure. And Andy, this time you actually reacted relatively quickly with the, you know, the changes on the cost base and it's always sad to see something go. Like, talk a little bit about, you know, what drove that to do it now rather than wait. Thanks, Raimo. Yeah, that's just our, you know, with the way we operate, right?

Speaker Change: We're just.

Speaker Change: Watching what's going on like everybody else I'm trying to run our company the best through it doesn't seem like dire circumstances.

Speaker Change: Not yet at least.

Speaker Change: I'd provides guests I'd say, probably won't get as bad as if some of the other downturns, we've had but I don't know either for sure.

Speaker Change: And then.

Speaker Change: Hum.

Speaker Change: From your equity retroactively quickly with the.

Speaker Change: With the changes on the cost patient until we start to see some floor.

Speaker Change: Talk a little bit about what drove that to do it now rather than wait.

Speaker Change: Thank you.

Speaker Change: Okay. Thanks very much.

Speaker Change: Yes.

Speaker Change: Just.

You saw us do that in the beginning of the pandemic, right? We think it was in May of the pandemic, we had a 5% reduction in force because our revenue went down 5%. This is a reaction similar to that, right? You know, we see a lot of uncertainty in the market and say, hey, we need to react to that. And if we can't control the revenue right now, we can at least control the cost. And it's important to us to keep making money and to keep trying to make 10% to 15% growth and even to every year.

Speaker Change: With the way, we operate right, where you saw us do that in the beginning of the pandemic.

Speaker Change: They give us.

Speaker Change: It may in the pandemic.

Speaker Change: 5% reduction in force because our revenue went down 5%.

Speaker Change: This is a reaction similar to that rate.

Speaker Change: See a lot of uncertainty in the market.

Speaker Change: And say, hey, we need to react to that and if we can't control. The revenue right now we can at least controllable costs.

Speaker Change: And it's important to us to keep making money and to keep trying to make 10% to 15% growth in EBIT every year.

That's really the main promise that we make to our shareholders. And we want to be able to live up to that promise and put ourselves in a position to live to fight another day and get through this a little better than other companies do so that, you know, when they get themselves in trouble, we have the money to buy up some of the better assets, just like we did, you know, in the in the 08 crisis and maybe to a lesser extent in the COVID crisis. Make sense? Good luck. Hey, thank you. Your next question comes from the line of Stephanie Price from CIDC, please ask a question.

Speaker Change: Really the main promise that we make to our shareholders and we won't be able to live up to that promise and put ourselves in a position to live to fight another day and get through this.

Speaker Change: A little better than other companies do so that.

Speaker Change: When they get themselves in trouble, we have the money to buy up some of the better assets just like we did.

Speaker Change: And the.

Speaker Change: And the prices and maybe to a lesser extent in the.

Speaker Change: The Covid crisis.

Speaker Change: Okay makes sense good luck.

Speaker Change: Alright, thank you.

Speaker Change: Okay.

Operator: Your next question comes from the line of Stephanie price from CIBC. Please ask a question.

Hi, thank you. Ed, I was hoping you could talk a little bit about the appointment of the new Chief Commercial Officer. I'm just curious if you're expected to make additional changes within the sales organization. No, I mean we've built work here five, six years now. We're very comfortable with him. He was being groomed for this move anyway and timing, you know, may have been a bit of a surprise to us, but you know I think there's a lot of faith in our company that he's the right guy for the job and happy for him that he's getting to step up and you know, for the most part he's running a large part of the Salesforce leading into this anyway, and now he's taking over the whole Salesforce.

Stephanie Price: Hi, Thank you.

Speaker Change: Ed I was hoping you could talk a little bit deployment of the new Chief commercial officer, and just curious if you expect to make additional changes within the sales organization.

Speaker Change: No I mean, we.

Speaker Change: Both work here five six years now we're very comfortable with him.

Speaker Change: He has been growing for this move anyway.

Speaker Change: Timing.

Speaker Change: A bit of a surprise to us, but I think there's a lot of faith in our company that he's the right guy for the job.

Speaker Change: And happy for him that he's getting a step up.

Speaker Change: Most parties running a large part of the Salesforce leading into this anyway and now has taken over the wholesales for so I.

So I think, you know, for the most part, you're not going to see a lot of change in our sales effect. Great. And then just on the consolidation that we're seeing within the space, obviously WiseTech announced the acquisition of E2 Open. Just curious what your thoughts are around the competitive environment here and how you see it evolving over time. Yeah, I mean, it's probably a sign of the times, right? You know, I've been saying for a while, prices are coming down. People are more willing to come into a price range that we think is an appropriate amount to pay for a company.

Speaker Change: I think.

Speaker Change: For the most part youre not going to see a whole lot of change in our sales effectiveness.

Operator: Great and then just on the consolidation that we're seeing within the space, Obviously wise check announced the acquisition of EQ Open just curious what your thoughts are around the competitive environment here and how you see evolving over time.

Speaker Change: Okay.

Speaker Change: I mean, it's probably a sign of the times right, we have been saying for a while prices are coming down people.

Speaker Change: More willing to.

Speaker Change: Coming to a price range that we think is an appropriate amount to pay for a company of the wife Jackie to open deals probably a sign of that we looked at that deal long time ago and decided it probably wasn't a great fit for us.

The WiseTech E2 Open deal is probably a sign of that. You know, we looked at that deal a long time ago and decided it probably wasn't a great fit for us. I wish WiseTech the best in that. We're not really competitive with either of those two companies in the market per se. But we do think we're in a very good position, you know, just with a lot of cash that we're sitting on and a lot of debt capacity that we have to make additional acquisitions in the future as prices come more into line. And, you know, we're in a healthier position than most to take advantage of that.

Speaker Change: <unk> not really competitive with either of those two companies in the market per se.

Speaker Change: But we do think we're in a very good position.

Speaker Change: Just with a lot of cash that we're sitting on a lot of debt capacity that we have to make.

Operator: Make additional acquisitions in the future as prices come more into line and.

Operator: We're in a healthier position than most to take advantage of that.

And we see stuff that's closer fit to what we like. We'd like to be able to jump on it and make sure that we make it part of our global logistics network. Thank you, Stephanie. Your next question comes from the line of John Shao from the National Bank. Please go ahead. Yes, thanks for taking my question. I understand there's a bit of noise around international freight volume at this point, because that one could be potentially volatile. But how should we think about the domestic freight volume, especially the correlation between domestic, international, any trends or any considerations you may share with us, given that South by you're doubling down investment domestic?

Speaker Change: When we see stuff that's closer to what we like we like to be able to jump on it and make sure that we make it part of our global logistics network.

Speaker Change: Thank you.

Stephanie Price: Thank you Stephanie.

Speaker Change: Okay.

Operator: Your next question comes from the line of John Shaw from the National Bank. Please go ahead.

Operator: Yes, thanks for taking my questions.

John Shao: I understand there's a bit of noise around international freight volume at this point not one could be potentially volatile, but how should we think about the domestic freight volume, especially the correlation between domestic and international any trend or any considerations you may share with us given that it sounds like you're doubling down investment domestic.

Yeah, I mean, you know, we were exposed to both and, you know, the tariff changes in our international space are between the US and the rest of the world, but not, you know, other parts of the world, other parts of the world. So, you know, there's still two thirds of our international business that's in normal shape at the moment. You know, we've been in a fortunate position to do very well in domestic, despite, you know, maybe that market being a weaker market for the last year and a half to two years, and hope to continue that.

Operator: Yes, we were.

Operator: Exposed to both in the tariff changes that are international spacer.

Speaker Change: Between the U S and the rest of the world, but not other parts of the world other parts of the world. So the store.

Speaker Change: Two thirds of our international business sits in normal shape.

Operator: The moment.

Operator: We've been an unfortunate position it to do very well on domestic despite.

Operator: Maybe that market being a weaker market for the last year and a half to two years.

Speaker Change: And hope to continue that and also as we expand over season domestic markets overseas.

And also, you know, as we expand overseas and domestic markets overseas, that we have a real opportunity to take the dominance that we've enjoyed here in North America over the last couple of years, you know, kind of growing in the face of of decreasing transaction volumes in domestic transportation, we continue to grow that business because we've been able to pick up business from our competitors, because we think we have a stronger offering. And we're looking forward to bringing some of that overseas in the coming years. You got it. Thanks for the colors. And in terms of the organic growth, considering some of the tariff policies after Q1, so how should we think about organic growth profile for Q2 and maybe going forward?

Speaker Change: Opportunity to <unk>.

Speaker Change: Take the dominance that we've enjoyed here in North America.

Speaker Change: Over the last couple of years kind of kind of growing in the face of.

Operator: Increasing transaction volumes in domestic transportation, you've continued to grow.

Speaker Change: That business, because we've been able to pick up business from our competitors because we think we have a stronger offering.

Operator: And we're looking forward to bringing some of that overseas in the coming years.

Speaker Change: Okay got it thanks for the color and in terms of the organic growth considering some of the tariffs pauses. After Q1, so how should we think about organic growth profile for Q2, and maybe going forward do you think it's going to be similar to the current level.

Do you think it's going to be similar to the current level? I, the short answer is I don't know, you know, we'll have to see what happens and I'm probably saying I don't know more than I normally have to say, you know, right now in the last couple months. We'll just have to see. I mean, we plan on running our business to perform well either way. We're very focused on making money. And we plan to make the kind of money that we've always promised people that we would make, despite whatever happens to the revenue. If you remember back 10, 12 years ago, we were growing 10 to 15 percent every year, you know, with one, two, and three percent organic growth.

Speaker Change: Yes, the short answer is I don't know.

Speaker Change: Well see what happens and I'm, probably saying I don't know more than I normally have to say it right now in the last couple of months in.

Operator: We will just have to see I mean, we plan on running our business to perform well either way, we're very focused on making money and we plan to make the kind of money that we have always promised people that we would make despite.

Speaker Change: Despite whatever happens to the revenue.

Speaker Change: If you remember back 10, 12 years ago, we were growing 10% to 15% every year.

Speaker Change: With one 2% and 3% organic growth so.

So even at four, which is, you know, not as well as we were doing a year and a half ago, and I think everyone might be able to see why, you know, we're hoping that that turns up. We're hoping that these tariff situations get settled and people can eliminate some of the uncertainty in their business and start to move forward and make decisions, and that will help our revenue growth there. In the meantime, we're planning to run our business so that we can still keep making money at the clip that we've always promised people that we would.

Speaker Change: Even if four which is not as well as we were doing a year and a half ago and I think everyone might be able to see why.

Speaker Change: We're hoping that that turns up for open that these tariff situations get settled and people can.

Speaker Change: Some of the uncertainty in their business and start to move forward to make decisions and that will help our revenue growth. There in the meantime, we're planning to run our business. So that we can still keep making money at the at the clip that we've always promise people that we bought it.

Thanks. Maybe one last question. Just try to reconcile your cost reduction with your goal to grow EBITDA by 10 to 15% on an annual basis. So my question is, is the expected cost savings already included in that target or just purely incremental to the target? It was an effort to make sure that we are in a position to hit this target. It may become incremental if growth rates go up, you know, if some of these tariff issues get settled and people get back to shipping stuff like they normally did, you know, we may end up doing better because of it, but we made these decisions to make sure we're in a safe position to continue to do 10 to 15% growth and even to like we've always said we would.

Speaker Change: Okay, maybe one last question for me.

Speaker Change: One last question just trying to reconcile your cost reduction with your goal to grow EBITDA by 10% to 15% on annual basis. So my question is that is it. So is the expected cost savings are already included in that target or just purely incremental to the target.

Speaker Change: No. It's it was an effort to make sure that we are in a position to hit those targets.

Speaker Change: And maybe some incremental.

Speaker Change: Yes, maybe come incremental if.

Speaker Change: Growth rates go up some of these to average just gets settled and people get back to ship and stuff like that normally did.

Speaker Change: We may end up doing better because of it but we made these decisions to.

Speaker Change: To make sure we're in a safe position to continue to.

Speaker Change: Two two.

Speaker Change: To do 10% to 15% growth in EBIT like we've always said we would.

Thanks again. Thank you. Next question comes from the line of Scott Group from Wolf Research. Please go ahead. Hey guys, this is Cole Cousens. Quick question on De Minimis. Is there any way that you guys can frame up how much of your transactional business is air freight? And do you have a How much of that is tied to the MNMS? And I know you hit on it a little in the prepared comments, but can you expand more on the I mean, I don't think we've separately broken that out. What I can tell you is that we've done quite well under the circumstances.

Speaker Change: Okay. Thanks again.

Speaker Change: Thank you.

Speaker Change: Next question comes from the line of Scott Group from Wolfe Research. Please go ahead.

Speaker Change: Hey, guys. This is cole cousins on for Scott Group.

Speaker Change: Just a quick question on de Minimis is there any way that you guys can frame up how much of your transactional business as airfreight and do you have a sense for how much of that is tied to de minimis.

Speaker Change: I know you hit on it a little in the prepared comments, but can you expand more on the activity Youre seeing now that de Minimis is going away.

Speaker Change: Out of the group.

Speaker Change: Separately broken that out what I can tell you is we've done quite well under the circumstances.

If you think about what's happened here, everyone was basically told that there's no more de minimis filing with China where most of it was coming from. You can imagine that if there's no more Type 86 filings, and it's a relatively small part of a quarter's revenue, but it's not nothing either. We were doing very well in it, and it all went away one day, May 2nd, and I think what we're doing about it, and we've benefited quite a bit from it, we also are the global leader in Type 1 filings, Type 2 filings, and Type 11 filings, which is what everyone switched to.

Speaker Change: If you think about what's happened here everyone was basically told US there is no more de Minimis finally, with China, where most of it was coming from.

Speaker Change: You can imagine.

Speaker Change: If theres no more type 86 filings in.

Speaker Change: Relatively small part of our quarter's revenue, but it's not nothing either.

Speaker Change: We were doing very well in it.

Speaker Change: <unk>.

Speaker Change: They all want a way one day.

Speaker Change: Second in.

Speaker Change: What we're doing about it and we've benefited quite a bit from it.

Speaker Change: We also are the global leader in type one filings type two filings in type 11 filings, which is what everyone's switch two.

I think a lot of these companies, they paused for a week or two and just said, I don't know what I'm going to do here. It's just like the Xians and the Timus and a lot of other people like them, and then they started shipping again. I think we were ready for that. Some of our competitors were not. We were able to pick up business from them as a result of that because they could not handle the volume in these new types of transactions that we had a lot of experience with already, but we're kind of new to some of our competitors, and we picked up.

Speaker Change: And I think a lot of these companies they paused for a week or two and just said I don't know what I'm going to do here is just like the <unk> and the team moves in a lot of other people like them.

Speaker Change: And then they started shipping again.

Operator: And I think we.

Speaker Change: We're ready for that.

Speaker Change: Some of our competitors were not we were able to pick up business from them as a result of that because it cannot handle the volume in these new types of transactions that we had a lot of experience with already but we're kind of new to.

Speaker Change: Some of our competitors and we picked up.

A bunch of businesses as a result of that. So, oddly enough, it's working out pretty well for us. um... maybe just more broadly with the rest of the transactional air and ocean Can you describe what you saw following the 90-day pause? Is there any indication from shippers at this point as to what's to be expected? All right. Are we going to see a lot of stuff after the pause, or is it just way too uncertain at this point? No, no one's, no one's, I mean, anyone will speculate about it, what's going to happen after the pause, but no one, no one seems to know for sure, including us.

Operator: A bunch of business as a result of that so.

Operator: And now it's working out pretty well for us.

Operator: Okay, great maybe.

Operator: Maybe just more broadly with the rest of the transactional air and Ocean business.

Speaker Change: Kind of can you describe what you saw following the 90 day pause and maybe is there any indication from shippers at this point as to what's to be expected.

Speaker Change: After the pause or the.

Operator: Way too uncertain at this point.

Operator: No one's anyone I'll speculate about it what's going to happen or deposit no. One no one seems to know for sure including us.

You know, prior to all this, as you might expect it, there was some pull-through, where people were trying to get stuff in before tariffs hit. Then, we saw a shift from the west coast ports to the east coast ports, where west coast volume was down significantly, but east coast volume was up, and, you know, that's tended, that seems to have subsided now as well, and I told you the stats for May, they were lower across the board in ocean. Air has held up pretty well. Domestics, you know, continues, I think, to be in a great recession, but we've kind of done pretty well on that, and we've, you know, picked up a lot of business from our competitors during that time, and, you know, we think we offer a great service in that area with Macro Point, and we by far have the most connections out there, and we've been able to get people to switch to us in the process from some of our competitors, so that's been pretty good news for us.

Speaker Change: Prior to all this.

Speaker Change: As you might expect that there were some pull through where people trying to get stuff in before tariffs hit then we saw a shift from the west coast ports to the East Coast ports, where west coast volume was down significantly, but east coast to coast volume was up.

Speaker Change: And.

Operator: Thats tended that seems to have subsided now as well and I told you the stats for me or they were lower across the board in Ocean.

Speaker Change: Erez held up pretty well.

Operator: Domestics continues I think to be in a freight recession, but we've kind of done pretty well on that and then.

Speaker Change: Picked up a lot of business from our competitors during that time, and we think we.

Speaker Change: We offer great service in that area with macro point and we by far have the most connections out there and we've been able to to get people to switch to us in the process from some of our competitors. So thats been.

Operator: Pretty good news for us.

Thanks guys, I'll turn it back. Next question comes from the line of Lachlan Brown from Redburn Atlantic, please go ahead. Hi, Ed, Allan. Thanks for the question. JTR Solutions has been a great driver for this business at the moment. Are you able to provide any data on the growth that you're seeing? Sorry, I'm not clear. Are you able to provide any detail that you're seeing within the tariff and duties database? And then just also any commentary on the performance of the other side of the global trade intelligence solutions, like sanctioned parties and bills of lading?

Operator: Okay. Thanks, guys I'll turn it back.

Paul Treiber: Thanks, Paul.

Operator: Next question.

Operator: <unk> comes from the line of Lackland Brown from Redburn Atlantic. Please go ahead.

Speaker Change: Hi, Alan Thanks for the question.

Operator: J P isolation payment growth dropping to the business at the moment.

Speaker Change: Provide any breakout Mccarthy.

Operator: Alright.

Operator: Im.

Operator: Not any data out and that you're seeing within the tariff and duty database.

Operator: And then just to offer any commentary on the performance at the other side of the global trade intelligence installations like sanction parties and deals of lighting.

The Sanctioned Parties is largely business as usual. We've been doing very well there. But really, the strength in that business has been on the tariffs and duties portions where the rates are changing all the time. We're seeing very good growth rates there year over year. I think we're somewhere almost approaching 20% right now. And, you know, I expect that's going to continue as long as tariffs are in the news every day. People are going to be looking for access to that database. A little bit to our surprise and pleasant surprise is the data mine business that's also in that content area has done very well as people have started to look in that database a lot more aggressively to try and figure out what to do next.

Operator: The sanction parties is largely business as usual, we've been doing very well there.

Operator: But really the strength in that business has been on the tariffs and duties portions where the rates are changing all the time, we're seeing very good growth rates there year over year I think we're.

Operator: Somewhere almost approaching 20% right now.

Operator: And.

Operator: Yes.

Operator: I expect that's going to continue as long as tariffs are in the news every day people are going to be looking for more access to that database a little bit to our surprise pleasant surprises the data mine business.

Operator: Also in that content area has done very well as people have started to look in that database.

Operator: A lot more aggressively to try and figure out what to do next and that's been a pleasant surprise for us so.

And that's been a pleasant surprise for us. So, you know, when these transaction volumes have gone down and you say, geez, it's all bad news for Descartes, I'd go, well, some of the areas are actually doing all right. Based on what's going on, because we've got a broad solution set that helps people in a lot of areas, even when some of the shipment volumes down. So that's why I see us put up, you know, what I'd say is decent results in the face of a very uncertain environment where people are frozen and not shipping as much as they did just a few months ago.

Operator: When these transaction volumes have gone down and you'd say Gee that spanned all bad news for Descartes.

Operator: Some of the areas are actually doing all right.

Operator: Based on what's going on we've got a broad solution set that that helps people a lot of areas, even when some of the shipment volumes now so.

Operator: That's why you see us put up what I would say is decent results in the face of a.

Operator: A very uncertain environment, where people are frozen and not shipping as much as they did just a few months ago.

Operator: Yeah.

That's very clear, thanks. And on the 3G TMS acquisition, I appreciate it's early days, but could you talk to the integration process and how you're thinking about the cross-sell, up-sell opportunity? And also, if you could provide any detail on the pricing structure, if it's volume-based or recurring subscription, and if there are plans to unify it with the pricing model for the other TMS systems. It's largely a subscription business and, you know, it's early days on the integration there. We thought, you know, we, and I mentioned this in the prepared comments, we needed to get their cost structures in line with ours.

Operator: That's very clear thanks, and on that <unk> acquisition. Appreciate it's early days, but could you talk to the integration process and how you're thinking about the cross sell upsell opportunity and also if you could provide any detail on the pricing structure. If it's volume buys still recurring subscription and if their plans to unify.

Operator: With Dr processing model Fiat in the Tms system.

Operator: It's largely subscription.

Operator: Subscription business.

Operator: And.

Operator: It's early days on the integration there we thought.

Operator: We and I mentioned this in the prepared comments, we needed to get their cost structures in line with ours. So we had a bit of a.

So, we had a bit of a restructuring right away. Day one, we bought the company. You've seen us do this a few times now. Macro Point, we did this. Visual Compliance, we did this, just in an effort to get them to run the way that we run. And, you know, we had to take a cash charge for that, which is, you know, it's just a towning issue. But, you know, in the long run, I think that's going to allow us to operate that business more profitably and get it integrated into Descartes more quickly. If you've heard us talk about how we do integrations, we go fast.

Operator: Restructuring right.

Operator: Right away day, one when we bought the company and seamless.

Operator: And as to this a few times now macro point, we did this visual compliance business.

Operator: In an effort to get them to run the way that we run.

Operator: And.

Operator: Take a cash charge for that which is just a timing issue but.

Speaker Change: Yes in the long run I think that's going to allow us to operate that business more profitably and get it integrated into Descartes and more quickly.

Operator: You've heard us talk about how we do integrations, we go fast.

You know, we move everyone into their component parts of our business, and that's already happened, and try and make them part of the same team. And I know already that they're selling, you know, 3G with Macro Point and my carrier portal all bundled together a number of times already. So, that's, you know, a little bit of a sign to me that the acquisition is going to work well. So, we're excited about that. Thanks, Ed. I appreciate the question. Hey, thank you, Lachlan. Your next question is from the line of Richard Chu from Scotiabank, please go ahead.

Operator: We move everyone into their component parts of our business and Thats already happened.

Operator: And try and make them part of the same team and I know already that they are selling.

Richard Chu: <unk> <unk> <unk>.

Operator: Macro point in my carrier portal all bundled together.

Operator: A number of times already so that's.

Operator: A little bit of a sign to me that the acquisition is going to work well. So we're excited about that.

Richard Chu: Thanks, Ed I appreciate the question.

Speaker Change: Okay. Thank you Michael.

Speaker Change: Your next question is from the line of Richard <unk> from Scotiabank. Please go ahead.

Hi, this is Richard in for Kevin today. I was wondering if you could talk a bit more about the acquisition pipeline. If you look across roughly your half dozen or so areas of logistic slash supply chain industry that you cover, are there any areas that are standing out as a particular area of focus or interest? Can you talk about, you know, valuations and competition with peers or private equity, which might also be looking to make some acquisitions? The acquisition market for us is looking very good at the moment. You've seen us do a lot in the last year and a half.

Richard Chu: Hi, This is Richard in for Kevin today.

Operator: I was wondering if you could talk a bit more about the acquisition pipeline. If you look across roughly your half dozen or so areas of logistics.

Operator: The chain industry that you cover are there any areas that are standing out as a particular area of focus or entrust can.

Operator: Can you talk about valuations and competition with peers or private equity, which may also be looking to make some acquisitions.

Operator: The acquisition market for US is looking very good at the moment, you've seen us do a lot in the last year and a half I think you probably likely to see that continue.

I think you're probably likely to see that continue. Prices are coming down. Contrary to what you said a second ago, we are not seeing private equity firms show up nearly as much as they used to. We're seeing them back out of deals all over the place or be selling companies instead of buying companies. A good friend of mine in private equity once told me, we're either buying or we're selling. We're not doing both. I think in large part, they are selling right now. They have investors that are saying, where's my money? I'd like to get some money back out of this thing.

Operator: Prices are coming down contrary to what you said a second ago, we are not seeing private equity firm show up nearly as much as they used to and we're seeing them back out of deals all over the place or B.

Operator: The selling companies instead of buying companies.

Operator: A good friend of mine and private equity once told me, we're either buying or we're selling we're not doing both and I think in large part they are selling right now.

Operator: And trying to they are investors that are saying where is my money I'd like to get some money back out of this thing and they're feeling that pressure.

They're feeling that pressure. When they do show up in deals, they're not showing up nearly as aggressively as they have in the past, and that's creating an opportunity for us. High interest rates harm them a lot more than they harm us. We're making money and using our cash flow to buy companies. They were levering up to buy companies and doing so four, five, six, seven times, which in our world would be very dangerous. We probably wouldn't go past three. Three would be too low for them. They would think that was not using their cash well enough.

Operator: When they do show up in deals they are not showing up nearly as aggressively.

Operator: As they have in the past and thats, creating an opportunity for us.

Operator: High interest rates harm them, a lot more than they harm us, where we're making money and using our cash flow to buy companies. They were levering up to buy companies and doing so 4567 times, which our role will be very dangerous.

Operator: We wouldn't go past three.

Operator: They were normally throughs through too low for them. They would think that was not using their cash flow.

All of a sudden, when interest rates are up in the high single digits, that changes the game. It doesn't change it for us, really, because we're making profits. We're putting that cash in the bank and using it to fund future acquisitions. We're playing a different game than they are. We want to be around when prices keep coming down, if the economy does take a turn for the worse here, we want to be able to keep making the same kind of margins we were making and growing the same amount every year, even with lower revenue growth.

Operator: While the sudden when interest rates are up in the high single digits that changes the game.

Operator: It doesn't change it for us really because we're making profits for <unk>.

Operator: That cash in the bank and using it to fund future acquisitions, and so we're kind of playing a different game than they are.

Operator: And we want to be around one.

Operator: Prices keep coming down as the economy does.

Operator: Take a turn for the worse here.

Operator: To be able to keep making the same kind of <unk>.

Operator: Margins, we are making in growing the same amount every year, even with lower.

Operator: Revenue growth and.

Operator: That's <unk>.

Why you see us take a lot of the actions that we've described here on the call. I could argue this is when we're at our best, historically, is, you know, times get tough and the decisions get very difficult, and we've been through a lot of that before. long-tenured management team that's been working together for a long time and we've done well in a lot of difficult situations together. If I could describe it, When trouble like this starts, a lot of teams start fighting with each other about having to cut costs and where are you cutting costs and I'm not and blah, blah, blah, all these things, that's not what's going on here.

Operator: Why you see us take a lot of the actions that we've described here on the call.

Operator: And I could argue this is one of our best historically as times get tough and the decision to get very difficult and we've been through a lot of that before.

Operator: Sure.

Operator: Long tenured management team that's been working together for a long time.

Operator: And we've done well in a lot of difficult situations together.

Operator: No.

Operator: If I could describe it.

Operator: Sure.

Operator: When when trouble like this starts a lot of teams start fighting with each other.

Operator: About having to cut costs and why are you cutting costs in <unk> and <unk> all of these things.

Operator: That's not what's going on here you have a bunch of people that have been through this before and Theyre almost going hey, no one likes doing this but we are good at it and we're going to do a good job here so that we come out.

You have a bunch of people that have been through this before and they're almost going, hey, no one likes doing this, but we are good at it and we're going to do a good job here so that we come out in a better position than we went into it and come out in a better position than our competitors, which puts us in a very good position to grow handsomely as things start to improve. You saw that happen in 08, you saw that happen in 2020 and we're certainly gearing up to make sure that happens here.

Operator: In a better position than when we went into it and come out in a better position than our competitors.

Operator: Which puts us in a very good position to.

Operator: Two to grow handsomely as things start to improve you saw that happen in <unk> you saw that happen in 2020 and.

Operator: We're certainly gearing up to make sure that happens here.

Got it. Thank you. Also, I was wondering, is there any way to give us a view of the breakdown of your customers or revenue base by S&B versus enterprise? And are you seeing any changes, positive, negative in this current macro on the S&B portion of the business? No, I don't know if I can, I don't know if I can, I don't know enough to break it down, but I can tell you we're seeing, you know, things haven't gotten that bad. We're seeing customers still sign contracts, pay their bills. You know, certainly our larger customers have been paying, and even our small and medium-sized ones.

Operator: Got it thank you.

Operator: Oh, sorry, I was wondering is there any way to give us a view of the breakdown of your customers our revenue base by SMB versus enterprise and.

Operator: And are you seeing any changes positive or negative in this current macro on the SMB portion of the business.

Operator: I don't know if I don't know if I could I don't know enough to break it down but I can tell you, where we're seeing things havent gotten that back we're seeing customers still signed contracts pay their bills.

Operator: Certainly our larger customers.

Operator: And pain.

You know, remember, most of our smaller ones are on credit card payments. They kind of have to pay their bills. Medium ones, maybe it's the area where you'd see that kind of change if things got bad, but we haven't seen it yet. Okay, great. Thanks for taking in my questions. Thanks. The next question comes from the line of Robert Young from Catherine, please go ahead. Hi, good evening. The comment you made about MacroPoint, the real time visibility, driving some share gains, just given, you know, your coverage and the demand you're seeing there. I think last quarter, you suggested that that was particularly a function of the shipper market and you're moving into their big retailers and manufacturers.

Operator: In our small and medium size ones remember most of our smaller ones are on credit card payments.

Operator: They kind of have to pay their bills medium ones, maybe it's the area, where you would see that kind of change if things got bad, but we haven't seen it yet.

Robert Young: Okay, great. Thanks for taking my question.

Operator: Thanks.

Operator: The next question comes from the line of Robert Young from Cochran. Please go ahead.

Robert Young: Hi, yes, good evening.

Robert Young: The comment you made about macro point, the real time visibility driving some share gains just given your coverage and the demand youre seeing there I think last quarter. You suggested that that was particularly a function of the shipper market and youre moving into their big retailers and manufacturers.

I was curious if you could expand on that, maybe dig into that a little bit if that's what's going on. There's a little of that going on. I think the biggest thing is picking up more 3PLs and freight brokers and picking up more business from them as they consolidate. We tend to do business with almost all the big 3PLs and freight brokers in the country, and as some of the smaller or medium-sized guys close their doors, they're getting picked up by some of our bigger customers, such as the Robinsons and Conways of the world, and that's been good for us.

Operator: I was curious if you can expand on that maybe dig into that a little bit if that's what's going on.

Operator: Okay, there's a little of that going on I think the biggest thing is picking up more.

Operator: <unk>.

Operator: And.

Operator: Freight brokers.

Operator: And picking up more business from them as they consolidate.

Operator: We tend to do business with almost all the big <unk>.

Operator: Freight brokers in the country and as some of the smaller or medium sized guys closed their doors are getting picked up by the some of our bigger bigger customers the robinsons.

Operator: Con ways et cetera of the world convoys excuse me.

They go back to us because we have better data. We have track rates almost at 90%. Our competitors have track rates in the U.S. 50s and you know if you want to track all your shipments and you send them in and you only get to track half of them is your visibility solutions provider all that good and if you send it in us and you're tracking 90 of them I think you're pretty happy and you say hey that's a good that's a good guy to be with and so when you buy up another small company you tend to switch them over to us or when you have a contract with with multiple players in the visibility space and you go to renegotiate those contracts you tend to send most of the business to the to the guy that does the best and that's that's us Alright, and then in the call earlier, you said that you're not seeing any of the customers tripping their minimums on the transaction revenue.

Operator: And that's been good for us they go back baskets.

Operator: We have better data, we are track rates almost at 90% of our competitors have track rates.

Operator: <unk> and.

Operator: If you want to track all your shipments and you spend a minute and you only get to track half of them as your visibility solution provider all of that good and if you send and announced a new track in 90% of them.

Operator: I think youre pretty happy and you say hey, that's a good that's a good got it.

Operator: And so when we buy up on a small company you tend to switch them over to us or when you have a contract with multiple players in the visibility space and you go to renegotiate those contracts you tend to send most of the business to get it the best.

Operator: Yes.

Operator: Alright, and then in.

Operator: In the call earlier, you said that youre not seeing any of the customers tripping their minimums on the transaction revenue.

Was that was that a Q1 comment? Or is that, you know, as of today? And like, is there any pricing pressure at all that you're seeing? I would assume given that comment that there's not a lot of pricing pressure or pressure to renegotiate minimums, but maybe just expand on that. And then I'll pass it No, we're not seeing any yet. I don't think... I haven't heard anyone say we're in a recession yet, although we may hear three months from now that we are in one now, but I'm not seeing our customers in any kind of dire straits and we're not, I don't think I've seen anyone hit the bottom of their minimum.

Operator: Was that was that a Q1 comment or is that as of today and is there any pricing pressure at all that youre seeing I would assume given that comment that there is not a lot of pricing pressure or pressure to renegotiate minimums.

Operator: Can you just expand on that and then I'll pass the line.

Operator: No we're not seeing any of that.

Operator: I don't think.

Operator: I haven't heard anyone say, we're in a recession yet although.

Operator: We made here three months from now that we are in one now.

Operator: Im not seeing our customers in any kind of dire Straits and we're not.

Operator: I don't think Ive seen anyone hit the bottom there minimum their minimums are usually set at 85 or 90% of their.

Their minimums are usually set at 85 or 90% of their normal volume. and I haven't seen anyone of note hit that. Great, thanks for the call, I'll pass the line. Thank you, Rob. The last question comes from the line of Mark Schappel from Loop Capital Markets. Please ask your question. Hi, thank you for taking my question. Ed, I was wondering if you could just comment on the sentiment you're seeing from CIOs with respect to moving forward with large TMS upgrades or expansions, and are you seeing TMS upgrades actually being crowded out by other IT and DGs?

Operator: Their normal volume.

Operator: And I haven't seen any one of note effect.

Operator: Great. Thanks for the color I'll pass on.

Operator: Thank you Rob.

Speaker Change: And the last question comes from the line of Marshall Paul from Loop capital markets. Please ask your question.

Operator: Alright. Thank you for taking my question I was wondering if you could just comment on the sentiment you're seeing from <unk> with respect to moving forward with large Tms upgrades expansions and are you are you seeing.

Operator: T Musk Tms upgrades actually being crowded out by a variety of initiatives.

I know we continue to see, and we've seen this for the last several years. You know, let's say the logistics and supply chain initiatives are rising to the top of the organizations because their importance has increased in the last 10 years, really, maybe even more specifically, last five since the pandemic. And I haven't seen any real change in that yet. You know, I think if the economy turned and it got worse, you know, you might start to see that even in our space, but we haven't. We haven't seen it yet in our space. Our subscription sales continue to go well.

Speaker Change: I know, we've continued to see and we've seen this for the last several years.

Operator: Yes, let's say the logistics and supply chain initiatives are rising to the top of the organizations to get their importance has increased in the last 10 years really maybe even more specifically less five since the pandemic.

Operator: And I haven't seen any real change in that yes, I think if the economy turned and it got worse you.

Operator: You might start to see that even in our space, but.

Operator: We haven't.

Operator: We haven't seen it yet in our space our subscription sales continue to go well.

I don't think we had a record quarter this quarter subscription sales, but we were close to the high end of subscription sales over the last two years. So, happy that's the case. Now, look, if we go into recession, you know, that could change. In the last year, we've had a lot of customers say stuff to us like, we've canceled a number of IT projects here. We're not canceling yours because it's important. But, you know, that always catches my attention because I think if things got a little worse, it might catch us too. But that has not happened yet.

Operator: I don't think we had a record quarter this quarter subscription sales, but we were close to the high end.

Operator: Subscription sales over the last.

Operator: Two year so happy.

Operator: Thats the case I look if we go into recession that could change.

Operator: And the last year, we've had a lot of customers today stuff to us like we've canceled a number of projects here, we're not canceling yours, because it's important.

Operator: That always catches my attention because I think if things got a little worse it might catch us too.

Operator: That has not happened yet.

Thank you. Thank you, Mark. There are no further questions at this time. I'd like to turn the call over to Mr. Ed Ryan for closing comments. Sir, please go ahead. Hey, great, guys. Thanks for your time. I'll be on the street in the coming weeks. We look forward to seeing a lot of you. And otherwise, look forward to reporting back to you on RQ2 here in September of this year. Thanks, guys. This concludes today's conference call. Thank you very much for your participation. You may now disconnect.

Operator: Thank you.

Speaker Change: Thank you Mark.

Operator: There are no further questions at this time I'd like to turn the call over to Mr. Ed Ryan for closing comments, Sir. Please go ahead.

Operator: Hey, great guys. Thanks for your time.

Operator: In the coming weeks, we look forward to seeing a lot of you and otherwise look forward to reporting back to you.

Operator: On our Q2 here in September this year, thanks, guys.

Operator: This concludes today's conference call. Thank you very much for your participation you may now disconnect.